Your Guide to Starting a Cannabis Business in Florida | Cogent Bank

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Inside Cogent        Blog        Your Guide to Starting a Cannabis Business in Florida
Your Guide to Starting a Cannabis Business in Florida
January 18, 2023

Your Guide to Starting a Cannabis Business in Florida

The cannabis industry is one of the fastest growing fields in the country. According to the Orlando Business Journal, the field has brought nearly $6 billion to the state of Florida, despite the fact that there are many legal hurdles industry leaders face to even get started. Unlike many other states, you cannot simply open a dispensary—you must apply for and be granted a license to run a ‘vertically-integrated’ Medical Marijuana Treatment Center (MMTC). What exactly does that mean? As South Florida Hospital News explains, “the MMTC must be proficient at all product phases: grow-process-test-package before any product arrives at their own branded retail location.”  

While applications to start an MMTC are currently closed at the time of writing this article, the Florida Department of Health Office of Medical Marijuana has pledged to issue up to 22 additional licenses in the near future, with even more possibly in the works. If you are hoping to acquire one, there are some important things you’ll need to do to prepare well in advance to increase your chances of approval. And if full legalization happens, getting established ahead of the rest could set you up for great financial success.  In this post we’ll give you a basic overview of what it takes for growers and their partners to start a cannabis business in Florida under current regulations. Keep reading to learn more. 

According to Grand View Research, the U.S. cannabis market generated about $10.8 billion in 2021. It is expected to grow 14.9% annually from 2022 to 2030.

Research Your Market 

While some states like Colorado embraced the legalization of marijuana, Florida has been more reluctant to go for full legalization, and current usage is restricted to compassionate, medical use. And in many places, from public transportation and public spaces to places of employment, as well as some municipalities, all usage is still banned, even for medical purposes. 

If you’d like to open a marijuana dispensary in Florida, be aware that you must be proficient in all levels of operating a cannabis business—sometimes referred to as ‘seed-to-sale’. That means you must be a licensed grower, too—you can’t simply purchase products to sell in a store front. In fact, you’ll need to have a valid nursery certificate of registration from the Department of Agriculture and Consumer Services to apply for a license to operate a cannabis business. If you don’t have an agricultural background, it is possible to partner with an established grower, though finding the right partner will require significant research, networking, and relationship-building. 

Your first dispensary may face some local resistance, in addition to the usual challenges associated with entering a heavily regulated industry. Reading this guide will help you understand the basic ins-and-outs of starting a cannabis business, but it’s important to research your local market to see what obstacles you may face. Take the time to learn about local regulations and discuss your plans with city officials to find out if there are any special restrictions you may face in specific municipalities, as well as local taxes (on top of the usual 6% sales tax). Attending a trade show to speak with others in the industry, or reaching out to dispensaries in other parts of the state, can also help you gauge the process of starting your own business here in Florida. 

As evidence grows for the economic benefits of cannabis sales, attitudes may be changing, and getting in on the ground floor could be a great economic opportunity. In fact, in 2021, there were over $1.3 billion in medical sales in our state, and they’re expected to nearly double this year.   

Apply and Obtain Your License 

Each state’s cannabis sales licensing process is different, in part due to the lack of federal regulation of legal cannabis sales. In Florida, marijuana can currently be sold legally for medical purposes only, so operating a legal cannabis dispensary has numerous requirements in addition to the standard operating challenges of a retail establishment.

You must have a Medical Marijuana Treatment Center (MMTC) license in order to dispense, cultivate, process, and transport medical marijuana in Florida. This is an essential step in the process, albeit expensive considering you’ll also need to factor in the other expenses associated with opening and operating a business that not only grows but also processes and distributes a product. And before you even apply, there are some requirements of all applicants: you will need to have both a solid business plan, as well as at least a five year history of doing business in the state of Florida, and that aforementioned nursery license, and the skills needed to not only cultivate marijuana, but also harvest, dry, test, package, and distribute it. 

When you are ready to open your dispensaries, you will need to submit an application to open a dispensary with the Florida Department of Public Health, which has an initial fee of $60,063 that also must be paid with each biennial renewal. And lastly, if you plan to sell marijuana in edible form, you will also need to obtain a Medical Marijuana Treatment Center Edibles Food Establishment Permit, which is issued by the Florida Department of Agriculture.   

A major complication you will face when applying to be a MMTC is the shortage of available licenses, a problem that has plagued the application process since its inception in 2017—though 22 more licenses are set to be made available soon. The Office of Medical Marijuana Usage (OMMU) will publish the dates that applications for these new 22 licenses will be opened, and expect that many competitors are waiting in the wings. Be sure to have all your ducks in a row before you apply to increase your chances of snagging a coveted license. 

Florida offers one cannabis license type which is the Medical Marijuana Treatment Center license, which requires that license holders engage in all supply chain activities including cultivation, processing, and dispensing of cannabis products to registered medical cannabis patients.

Find Funding for Your Business 

Historically, finding funding for cannabis businesses has been a difficult and time-consuming process. As writes, “cannabis businesses are often unable to open a traditional line of credit or loan, thus limiting a common early-stage option for additional growth financing. That means bootstrapping or raising money from friends, family members and angel investors is the most common way young companies gain a foothold.”

As you’re pulling your business plan together in anticipation of applying for the appropriate licenses to operate your cannabis business, you’ll want to have firm plans for where the funding will come from. You may have some capital of your own, and you may also tap investors who wish to provide their financial support, but you will almost certainly need additional financial support to get your business off the ground, whether in the form of a commercial real estate loan or other business lending. This is where a local community bank that specializes in helping Florida businesses can be a huge benefit. Partnering with the right bank is essential—you don’t just want a lender, you want to find a financial partner with whom you can have a robust relationship. Start a conversation with a commercial banker or lender, discuss your needs, and they can help you find some financial solutions to benefit your business.   

In addition to financing your startup, partnering with a cannabis-friendly bank is also essential for your day-to-day business needs, from accepting customer payments to managing payroll and making payments to vendors. For more information about what Cogent has to offer, visit our Business Banking page.  

Purchase Real Estate and Equipment 

In order to get that MMTC approval, you’ll need to have a suitable location in mind—and finding one isn’t always that easy. Some communities in Florida won’t permit the cultivation of marijuana or ban the establishment of dispensaries, while others heavily restrict it. For instance, in Miami Beach, recent regulations restricted how close dispensaries can be located to each other. Before you settle on a site for your business, it’s important to research whether or not you will be allowed to operate a cannabis establishment in that area. Beyond zoning restrictions, there may also be pushback from neighboring businesses and residents. You should always have an attorney familiar with the local real estate and zoning requirements review location information and leases before investing in any one specific property. You can also utilize websites like 420 Property to help you find potential locations.  

When you’re setting up your retail space, you’ll also need to find a location with the right specifications to run a successful dispensary. Since most dispensaries have a designated check-in area for customers, you will need to find a property that can accommodate this, as well as a place to safely and securely store your products. Easy access to parking—especially for individuals with disabilities—and a location that can appeal to a wide customer base is also key. 

Beyond finding the right real estate, you will also need to purchase a lot of specialized equipment for growing, as well as processing, testing, and packaging your products. Growing systems, particularly indoor ones, are complex, and can cost hundreds of thousands of dollars or more to set up, from lights and racks to security systems; many cannabis startups will require significant financing to even begin.  

If you’re seeking funding or banking services for your cannabis business in Florida, consult with a relationship banker who understands the industry and can help you navigate it efficiently.

Setting up your dispensary may feel insignificant by comparison, but you’ll want to have a plan for how to pay for items needed for this phase as well, including: 

  • Balances and scales 
  • Weight checkers and moisture analyzers 
  • Safes 
  • Packaging equipment 
  • Storage systems 
  • Computer systems for managing inventory and orders, accounting, and compliance 
  • Point-of-Sales (POS) equipment 
  • Labeling equipment for compliance purposes 
  • Counters, displays, and waiting room furniture 

Even if you have cash leftover from investors or from your own resources, for many of these purchases you may want to use commercial funding in the form of a business term loan or line of credit to keep other assets liquid as you manage the first few months of your business.  

It’s important here to note that since marijuana is still considered illegal at the national level, this limits your ability to write off expenditures. In fact, IRS tax code Section 280E specifically prevents the deduction of costs associated with “trafficking of controlled substances.” Even if your growing and distribution is entirely legal under state regulations, federal law prevents you from deducting your business expenses from your federal taxes. 

Hire Employees 

While many communities here in Florida are hesitant to embrace cannabis sales, one arguably positive benefit is the fact that this industry has created thousands of jobs in our state since 2017. In fact, in the first year of operations (2018), the number of cannabis employees grew from 1,200 to nearly 10,000. A recent survey found that there are currently about 35,000 employees in the industry.   

But finding qualified team members to handle various aspects of your business isn’t always cut and dry. In addition to workers needed to plant, tend, harvest, and process your crop, there are a lot of potential positions you’ll need to fill at your dispensary. And with any new industry, you may not always find your application pool contains the most ideal candidates. According to Flowhub’s guide, “How to Open a Dispensary”, roles to hire for will include: budtenders and sales associates, a general manager, greeters/receptionists, security, a compliance manager, an inventory and/or purchasing manager, and software/IT manager. Many dispensaries use services like Vangst, a cannabis employee recruitment platform, to help them find the right people for their growing MMTC establishment. 

Establish Treasury Management Services

Once you are established with your financial partner, your first crop has been processed, and your application to dispense has been approved, it’s time to start preparing for your opening day. An important aspect of that is setting up your business’s treasury management services.  

Using treasury management from a trusted community bank not only allows you to easily manage the financial side of your business but is also essential to professionalize your operations and appeal to a wide variety of customers. And setting up these services at the same bank you partnered with for funding allows you to house all of your financial needs under one roof. At Cogent Bank we offer a full suite of Treasury Management Services including remote and mobile deposit, online banking, online wires, ACH, and cash processing. 

At Cogent Bank, our cannabis banking program is focused on businesses throughout the cannabis supply chain including dispensaries, cultivators, wholesalers, testing companies, and many more.

Work with a Bank with a Proven Industry Track Record 

At Cogent Bank, we know the cannabis industry is an important contributor to Florida’s strong economy, and are proud to partner with businesses in this growing field. 

Cannabis banking is one of our industry specialties. We not only provide dispensary business loans, but also traditional treasury services to cannabis businesses that can professionalize your establishment, assist in your financial recordkeeping, and simplify payments. Concerned about point-of-sale compliance? Our partnership with Green Check, who works with many point-of-sale providers, allows for easy integration and seamless bank deposit reporting.  

From business checking accounts to handle your cash flow to savings accounts to grow your nest egg and set aside funds for expansion, we have all the business banking products to meet your startup’s needs. Reach out to us today to begin your cannabis banking relationship.