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5 Financial Challenges CBD Business Owners Face

Posted by on February 18, 2021 in Business with 0 Comments

Introduction

CBD or cannabidiol has some health benefits such as reducing pain, stress, anxiety, skin ailments, etc. Since the number of people facing these health problems is increasing due to unhealthy lifestyles and work environments, there is a high demand for CBD products.

Hence, many entrepreneurs entered the CBD industry. However, there are many risks involved with these businesses due to legal restrictions and improper financial solutions. Since all marijuana products are not legal and some states even completely ban any kind of CBD products, it’s difficult for business owners.

In this article, you will know what the major financial challenges that CBD entrepreneurs are facing right now are. Also, you will explore some possible alternatives to overcome those challenges.

Five Financial Challenges That CBD Business Owners Face

Although some financial firms came forward to provide cannabis credit card processing, legal restrictions have become a primary challenge for CBD business owners. Apart from that, marijuana companies are struggling with other financial issues.

1.    Improper Financial Infrastructure

There is not proper financial infrastructure for the cannabis industry. So, business owners are finding it difficult to receive payments from their customers. Some marijuana companies are conducting their business with cash transactions, but it’s highly expensive and also insecure.

Cash transactions are vulnerable to theft, so it's insecure about conducting business in cash-only mode. Since banks and other financial institutions don’t want to enter into high-risk industries like cannabis, business owners struggle. However, things are changing with some innovative payment solutions like Cashless ATM and Contactless Payments.

2.    Legal Restrictions Hinders Business Growth

Although CBD products have several health benefits, some states still ban them for some reasons. CBD oils and pills are useful in relieving stress, anxiety, reducing acne and other skin problems. However, CBD with more than 0.3% THC can cause psychoactive high and other side effects in the body.

Hence, there are many regulations, and it’s also illegal in some regions. Due to legal restrictions, the cannabis industry cannot grow properly. Moreover, banks and financial institutions don’t want to get into such high-risk industries. Although some firms provide innovative payment solutions, they charge high transaction fees.

3.    High Transaction Fees

Even though some firms have come forward to provide financial services to cannabis companies, the number is very less. Due to fewer numbers and high competition, they are also charging high transaction fees.

Hence, merchants have to pay a lot of money as transaction charges and extra processing fees. Since it’s convenient for the users and secure than cash transactions, they prefer to go with either cashless card processing or online payment methods.

4.    High Competition With Risks

Although there are a lot of risks involved in the cannabis industry, there is high competition. It’s because people want to purchase CBD products for various health issues like stress, pain, anxiety, skin problems, etc.

With the high demand for CBD products, the number of marijuana companies is also growing. It leads to high competition, and if you cannot deal with all the restrictions and competition, it’s hard to sustain in the industry.

5.    Fundraising is Not Easy

Last but not least, fundraising is not easy in the marijuana industry. Since I have mentioned several reasons, including legal restrictions, high transaction fees, improper payment solutions, investors don’t want to put money into cannabis startups.

It’s one of the major drawbacks for which many entrepreneurs are unable to start their firm. People don’t want to put their money into high-risk businesses like marijuana. Since chances are higher that investors can lose their money, nobody wants to invest in marijuana companies.

Final Thoughts

I hope you have understood the challenges that CBD business owners are facing in the marijuana industry. However, marijuana entrepreneurs are thankful to the financial firms that provide them innovative payment services. Even if they are charging high, it’s better and secure than cash transactions. So, if you have a marijuana or CBD firm, you can search for the online and cashless solutions available in your state.

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