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How to Open a Dispensary in New York in 2022
The Empire State – stands out by many interesting sights and facts from the neighboring states. And the fact we want to attract your attention to today is its vast potential in the cannabis business. New York, one of the most populated states on the east coast, is expected to create one of the biggest markets with a projected industry.
Based on Marijuana Regulation & Taxation Act (MRTA) which was signed on March 31st, 2021, New York has become the 15th and latest state to legalize the recreational use of marijuana. The Office of Cannabis Management (OCM) under the MRTA has been charged with granting licenses for businesses to participate in New York’s adult-use, medical, and cannabinoid hemp industries. The OCM also promotes social and economic equity for New York applicants who have been harmed by the prohibition of cannabis for adult-use licenses and plans to award 50% of licenses to social and economic equity applicants. This article demonstrates in detail how to open a cannabis dispensary in New York in 2022.
How to Open a Recreational Cannabis Dispensary in New York
The cultivation and processor related licenses have already been issued in New York and the retail dispensary application process is underway. As the adult-use market is expanding, key things to consider include social equity and conditional licensing.
For those planning to apply for a New York dispensary license, it’s essential to know that the application process will likely be quite competitive. So, make sure to be as prepared as possible for the dispensary application process. Under this license you will be allowed to sell marijuana and marijuana products to customers aged 21 and older.
The OCM is planning to release about 150 CAURD (Conditional Adult-Use Retail Dispensary) licenses that will cover 14 regions in New york.
In mid-August 2022, New York began accepting license applications for adult-use dispensaries. These licenses will only be issued to “justice-involved individuals” who suffered from enforcement during the war on drugs.
The applicants must provide documentation demonstrating that at least 30% of the applicant is owned by an individual who:
- Is justice-involved: Conviction of a canna-related offense in New York State before March 31, 2021, either themselves or a parent, legal guardian, child, spouse, or dependent;
- Has at least ten percent (10%) ownership, for at least two years, in a business that had positive net profits during the individual’s ownership;
- Has sole control over the applicant, as defined by having the power to order or direct the operation, policies, management, and managers of the business;
- Has operated a social enterprise that had net assets or profit for at least two years, defined as a business serving customers, operated by a nonprofit or fiscally sponsored by a nonprofit, which both fulfills the parent organization’s mission and generates revenue.
Additionally, 51% of the New York applicant’s ownership needs to be held by a qualified justice-involved owner.
To meet the qualifying nonprofit eligibility requirements, New York dispensary applicants need to ensure documents manifesting that at least 30% of the applicant is owned by one qualifying nonprofit organization that has:
- A history of creating vocational opportunities for justice-involved individuals;
- A history of intentionally serving justice-involved individuals;
- At least one justice involved board member, officer, governing committee member, or advising committee member;
- At least five full-time employees.
Social Equity License
As we mentioned above, the bill under MRTA awards 50% of licenses to social and economic equity applicants. These are individuals disproportionately impacted by cannabis prohibition, minorities, women business owners, service-disables veterans, distressed New York farmers, and service-disabled veterans.
This type of license plans also to create an incubator program to encourage social and economic equity applicants in New York to apply for licensure and to provide direct support in the form of counseling services, education, small business coaching, financial planning and compliance assistance.
How to Get a Dispensary License in New York?
In order to apply for New York marijuana dispensary license, applicants must:
- Be at least 21 years of age;
- Be a New York resident;
- Have no felony convictions;
- Manifest that they have the financial resources to open and operate a dispensary in New York by having audited financial statements;
- Submit a complete and precise application.
Once the license application process opens, business owners must ensure detailed information about their company and demonstrate that they meet all requirements to become a qualifying business.
According to initial info from the OCM, applicants for adult-use cannabis dispensary licenses in New York will have the following options to choose from:
Adult-Use Micro business Licenses- These licenses will be issued to vertically integrated cannabis businesses in New York operating under certain restrictions.
Adult-Use Retail Dispensary Licenses– will be the bulk of the adult-use dispensary licenses issued in New York. It remains undefined how many of these retail licenses will be awarded.
Adult-Use On-Site Consumption Licenses – are special retail sales licenses. With these licenses, dispensaries will provide consumption areas where cannabis products can be directly on site.
Adult-Use Delivery Licenses – will be issued to people who do not “have an interest in or own another adult-use license type.”
Registered Organization Adult-Use Cultivator, Processor, Distributor, Retail Dispensary Licenses -these are standard vertically-integrated cannabis business licenses with specific regulations on what types of products can be sold in these New York dispensaries.
How Much Does It Cost to Open a Dispensary in New York?
Do you want to know how much you need to start a dispensary? Here are the costs and primary requirements for opening a dispensary in New York.
To open a dispensary in New York, you must first get a conditional adult-use retail dispensary license. An applicant must meet either the qualifying business criteria or nonprofit criteria. The conditional adult-use retail license fee in New York costs $2,000.
Buying a property in New York varies quite a lot. The cost can range from $130/sq to 400/sq. If you intend to lease the property, you will have to consider monthly payments for a marijuana store from $3,500 up to $10,000 and even higher. It will also be necessary to consider the costs for the construction and renovation of the property in order to meet the regulatory standards; the cost related to this process ranges between $350,000 and $500,000; dispensaries of middle size – between $500,000 and $750,000, and dispensaries of large scale – above $750,000.
How Can I Get Funding to Open a Dispensary in New York?
Due to the expansion of canna-business in New York, more and more companies offer funding to marijuana business owners. The services they provide are as follows:
Working capital – is an option when your firm doesn’t have enough recurring revenue. It helps to cover the overhead costs like payroll and inventories.
Equipment financing – is a lease or a loan used to purchase equipment for growing, processing, and other purposes.
Commercial real estate financing – provides funding for acquiring land, warehouses, and other physical sites required to run a cannabis business in New York.
AR/invoice line of credit – allows growers and other businesses to sell outstanding invoices to factoring companies at a discount. These are frequently charged based on how long your clients take to complete their invoices.
Merchant cash advances – provide dispensaries and other consumer-facing enterprises with a cash advance on future purchases, which you must repay plus a predetermined fee.
Purchase order financing – allows you to borrow money to fulfill customer orders. When your clients pay for the order, you reimburse it plus a fee, just like with factoring.
So, suppose you have decided to dabble in the cannabis business and wish to open a dispensary in New York. In that case, such companies offer you options you may customize to your needs and be in compliance with the state regulations and requirements.
Here is what you should prepare to apply for a business loan:
- Good personal credit;
- A lengthy credit history – The duration of your credit history may influence your application. In most cases, you’ll require at least three years;
- No bankruptcies;
- You must have a business bank account;
- Requires a minimum amount of time in the business. Lenders usually demand that you have been in business for at least six months to a year;
- Legal standing – All business owners must be US citizens or permanent residents to be eligible.
There are other means to obtain a loan if your cannabis firm does not qualify for a business loan lender:
- Crowdfunding – is a way to raise money from multiple investors in exchange for equity or rewards. It allows individuals to invest up to $2,200 in small businesses in exchange for a share of ownership.
- Business lines of credit – is a type of revolving credit offered by many lenders and credit unions, which allow businesses in states with legalized medical or recreational marijuana to borrow money.
- Real estate loans – these loans can be used to purchase or refund the buildings or raw land your company needs.
- Private equity funding – some private equity firms may be willing to provide short-term, high-interest loans or financing in exchange for significant ownership of your business.
- Venture capitalists – wealthy investors interested in helping small businesses grow, generally in exchange for equity.
- Angel investors – angel investors, like venture capitalists, assist companies in their initial stages and often help with smaller sums of money.
- Personal loans – if you have a good credit history, you might have a higher chance of obtaining a personal loan.
- Home equity loans – a home equity loan or line of credit allows homeowners to borrow against the value of their homes. However, you must make sure that your use is legal.
How to Apply for a New York Dispensary License?
As official New Yorkers say, the conditional adult-use retail dispensary license is only accessible to applicants who fit the qualifying requirements and may obtain a loan or help to obtain a dispensary site. These dispensaries will be the first to operate in the state by the end of 2022, and others may emerge in early 2023. The amount of dispensaries is based on the market demand. A conditional adult-use retail dispensary license is valid for four years and renewable every two years. Before the expiry of the conditional license, license holders may transit to a standard retail dispensary license.
To apply for a dispensary license in New York you will need to:
- Submit all applications online;
- Create an account or sign in to your existing one on NY.gov;
- Log in to monitor the progress of your application after you have submitted your application.
Applicants seeking a conditional adult-use retail dispensary license must meet the following requirements:
- must be justice-involved, which means an individual convicted of a marijuana-related offense in New York before March 31, 2021, or had a family member or dependent who was convicted, or was a dependent of someone convicted;
- must have owned at least 10% of a thriving business for two years;
- if applying as an individual, must be a New York resident;
- if applying as an organization, must have a significant corporate presence in New York or be created under New York laws.
Medical Marijuana Program in New York
In 2015, New York started accepting applications from organizations to obtain a license for cultivating, manufacturing, and dispensing medical cannabis.
Organizations qualified to manufacture and dispense medical cannabis are allowed to produce their brand of medical cannabis products under State regulations.
Medical cannabis dispensaries in New York State have pharmacists on-site to help patients find the right product for their conditions.
How Will the Marijuana Business Benefit New York?
The New York cannabis business has shown clear expectations of making real profits on the market. Recreational marijuana businesses will likely generate a net profit of $300 million in tax revenue by 2024. Therefore, the time to start adult-use cannabis businesses in New York has definitely arrived.
New Yorkers who request a license should also start planning their business model and the location of their facilities and determine what products they will offer. They will also have to get the best marijuana plants to provide quality to consumers looking for recreational cannabis. You will also have to prepare your staff and team to sell marijuana in a safe manner.
- 40% of the tax income earned by adult-use sales will be directed to communities that the drug war has harmed.
- Low or no-interest loans, fee reductions or exemptions, and assistance in preparing applications and running a business will be provided to social equity applicants.
- Allowing micro businesses in New York to create vertical operations will help them reach economies of scale. Vertical integration would be forbidden for all firms except existing MMJ operators.
- Within the first three years after issuance, social equity licensees will be restricted from selling or transferring their licenses.
- Individuals from “communities disproportionately impacted by the enforcement of cannabis prohibition,” as well as minority and women-owned enterprises, disabled veterans, and financially troubled farmers, are defined as social equity applicants under the new law. The release of detailed guidelines is still pending.
The cannabis industry in the states is subject to rapidly evolving laws, rules, and regulations and increasing competition which may cause cannabis companies to change business models, shrink, or suddenly close and New York state will not be different. That’s why it is essential to be well-organized for the enterprise to succeed. Given the licensing steps, finding a suitable location, and developing your storefront to meet the state requirements, it may take over a year from application to selling.
However, with the right motivation and access to necessary resources, starting a cannabis business in New York remains a great lure due to its scale of profits and revenue. We hope these comprehensive guidelines on how to open a dispensary in New York in 2022 will give you a head start on your journey to opening a successful cannabis dispensary business in your home state.