Right now cannabis is booming. It is as good a time as any to get a piece of this 61 billion dollar industry. With public approval and legal support for cannabis at an all-time high, that number is only going to increase. Some think it could hit 130 billion by 2024. Despite all this revenue, many entrepreneurs may still be hesitant to hop on because financing for cannabis is so difficult to acquire. Here are the ten main roadblocks that cannabis businesses face for funding and how to get around them.
1. Federal Illegality
The first and most apparent cannabis financing roadblock revolves around the fact that cannabis is still considered illegal by the federal government. But since states make their own laws, marijuana legalization relies on state-by-state legislation. While you might not have an issue opening up a cannabis operation in a state where it is legal, you will hit a wall when it comes to cannabis financing. The federal government funds traditional lenders such as banks and credit unions; thus, they must adhere to strict guidelines regarding national policy.
2. Banks are hesitant to work with Cannabis ventures
Until recently, banks were entirely unable to loan capital to any marijuana-related business. In the eyes of the federally backed party, a company of this sort was considered illegitimate. But in 2019, this changed with the passing of the SAFE Banking Act. The government acknowledged the legitimacy of the cannabis industry, and so this bill released lenders from their previous restrictions. The SAFE Act protects financial institutions from facing any legal ramifications for working with a marijuana-related business.
Despite the “green light” to process funds, the vast majority of banks are still unwilling to work with a cannabis-related business. Banks are not interested in undergoing any enterprise that could be considered risky. As the operation relies upon a single bill, lending to a cannabusiness does indeed contain a good deal of risk.