CO2 extractors can be one of the most critical components for makers of infused products, but, assuming you’re buying quality equipment, they can also be one of the most expensive pieces of equipment you have to invest in.
Supercritical CO2 extraction equipment can start at prices as low as $35,000, but that is for the “mini” systems which are not expandable, have a 3/4 liter extraction vessel, and a 1 1/2 liter separation vessel.
The vast majority of customers buying CO2 extractors are looking at the “real deal” – machines in the $75,000 to $125,000+ range. It’s possible to obtain cheaper machinery than that if you’re not as concerned about quality – there’s space in the market for lower quality extracts and oils due to price sensitivity.
There’s nothing wrong with being the RC Cola of marijuana extracts, just know that if you buy lower quality equipment you’re going to have a lower quality product.
How Can You Qualify to Finance CO2 Extraction Equipment?
Many put buying the CO2 equipment last on their list, and by the time they call they have blown through most of their assets in starting up the business. One of the things that has hit newcomers to the industry by surprise is the amount of capital it actually takes to finance equipment for marijuana companies.
Realistically, operators will not pay bank rates for financing – banks aren’t financing anything in the industry. The industry is not going to get the lowest financing rates. That doesn’t mean you need to be charged 35% or more.
Here’s the deal:
- There are no historic numbers on default (the percent of people who don’t pay) so an underwriter is making a stab in the dark trying to pinpoint the risk profile
- Yes, your business plan has today’s wholesale prices factored in. There’s currently a shortage in all subsectors of the industry. 12 months from now, prices could drop in half.
- You’ll be competing with some folks in the space who are coming in with millions, and all businesses are more efficient at scale. You may have a better business plan, but lenders aren’t really marijuana experts and don’t have the expertise to determine that.
What are Rates to Finance Supercritical Fluid Extraction Equipment?
There are some very high rates for financing on the market today, often bundled together by machinery providers – some actuarial numbers impute a 25% default rate.
With that being said, rates have to be high enough to cover defaults, and also to make enough profit to justify taking on the legal risks and all the other challenges that go along with investing in the cannabis space.
I mean, why not just play it safe and investing in loans for ultrasound machines or dump trucks like the other 99% of the marketplace?
Rates vary depending how risky it is to lend to you. Rates will generally be a little bit lower if you’ve been around for a while than if you are a cannabis industry startup.
Generally though, we’re seeing rates from 10% to 20% per year (meaning your finance charges on $100k worth of equipment will end up being around $10k to $20k annually).
On the plus side, it’s common to hear people clear $30,000 plus monthly in profit from use of one extraction unit, so, at least for the short term, financing rates don’t matter one iota.
Extraxx offers machinery financing. You can apply for financing now!