The short answer
Construction loans fund a build in draws as work is done. Lenders usually want your equity in first.
SBA loans are off the table for most cannabis builds. Budget for interest and overruns before you apply.
On this page
Ground-up vs tenant improvement financing
| Type | What it funds | Main risk |
|---|---|---|
| Ground-up construction | A new building | Cost, schedule and permits |
| Tenant improvement | Buildout inside leased space | Landlord consent and lease length |
| Renovation | Upgrade of an existing site | Hidden conditions |
Tenant improvement lenders check the lease as closely as the budget.
How draws work
Ask how long a draw takes from request to funds. Slow draws hurt contractors.
Buildout Budget and Interest Carry
Estimate total project cost, loan, equity and interest during construction.
How to use this: Enter your budget and the lender's quoted loan-to-cost. The tool assumes draws arrive evenly, so the average balance is half the loan.
* Illustrative only. Not investment advice.
Why SBA is off the table
SBA programs do not serve most cannabis businesses. The agency's Form 1244 makes applicants certify no revenue comes from federally illegal activity.
Form 1244 names marijuana products and activities that support them.
Plan on private debt, owner equity or state programs instead.
Equity required before construction debt
Lenders usually want your equity in the project before they lend. One public lender targets collateral coverage of at least one times principal (10-K).
Ask what counts as equity, such as cash, land or paid costs.
Equity that is already spent may or may not count. Get the rule in writing.
Greenhouse and cultivation buildouts
- Power and HVAC drive cost and permits.
- Licensing inspections may gate occupancy.
- Equipment may be financed separately.
- Lenders check contractor experience.
See our equipment financing guide for gear that sits outside the construction loan.
Licensing contingencies
Construction can finish before a license is issued. That gap is a lender risk.
- Write a license contingency into the contract.
- Ask what happens if approval slips.
- Check local hearing dates before you commit to a schedule.
A worked example: a $1.2 million buildout
These numbers are an illustration. They match the estimator above.
Hard costs are $1,200,000. Soft costs add 15 percent and contingency adds 10 percent. Project cost is $1,518,000.
At 65 percent loan-to-cost, the loan is $986,700. Equity required is $531,300.
Over nine months at 12 percent with even draws, interest carry is about $44,400. Total cost with interest is about $1,562,400.
| Item | Result |
|---|---|
| Project cost | $1,518,000 |
| Loan | $986,700 |
| Equity | $531,300 |
| Interest carry | About $44,400 |
| Total with interest | About $1,562,400 |
A sample draw schedule
This is an illustration of how a $986,700 loan might release in stages. It is not a lender schedule.
| Draw | Milestone | Share | Amount |
|---|---|---|---|
| 1 | Site work and framing | 25% | $246,675 |
| 2 | Rough-in: electrical, HVAC, plumbing | 30% | $296,010 |
| 3 | Finishes and fixtures | 30% | $296,010 |
| 4 | Final inspection and occupancy | 15% | $148,005 |
Ask each lender for its real schedule and its inspection timeline.
Mistakes to avoid
- Underestimating soft costs and contingency.
- Starting work before the license path is clear.
- Ignoring draw timing in the contractor contract.
- Assuming equity already spent will count.
- Leaving overrun funding unspecified.
Ask the lender to show a sample draw schedule. It answers many questions at once.
Quick Check
See what capital you qualify for in under 3 minutes.
No origination fees for initial capital review. Terms depend on the deal and the lender.
Check Capital Eligibility →Frequently Asked Questions
Sources and further reading
- SBA Form 1244 (12-2021), applicant certification
- Chicago Atlantic Real Estate Finance, Form 10-K for fiscal year 2025 (SEC)
- FinCEN guidance FIN-2014-G001, BSA Expectations Regarding Marijuana-Related Businesses
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