Business Loans and Lending in Cannabis, Hemp, and CBD Industries
Business loans and other lending options provide companies like cannabis and hemp farms and dispensaries with the finance they need to develop their organization. These type of loans also suit cannabis companies who have recently experienced a financial emergency and want to cover a shortfall in funds.

The legal cannabis industry generated billions of dollars in sales in 2017, and experts predict this number could rise in 2018. As the sector grows, more companies are looking for finance options from banks and other lenders.

Which Lenders Provide Cannabis Companies With Finance?

Despite the growth of the legal cannabis industry in recent years, some lenders are still reluctant to provide cannabis and hemp companies with finance. Traditionally, cannabis and hemp farmers raised funds from family and friends or secured seed capital or crowdfunding investment from other companies. In 2016, the Securities Exchange Commission introduced regulations on cannabis-related crowdfunding operations.

In 2018, the U.S. Small Business Administration (SBA) introduced new lending rules for the cannabis and hemp industry. These new regulations could prohibit cannabis companies from applying for SBA-backed loans.

Currently, farmers and dispensary owners have limited options when it comes to taking out a loan. However, this could change in the next few years as the cannabis sector becomes more profitable. Research shows that the legal cannabis market in the United States will hit $25 billion by the year 2025, according to analytics firm New Frontier Data

Still, business owners have various financing options to choose from, including short-term loans and longer-term lending options. Short-term loans tend to come with higher interest rates; however, borrowers usually receive funds in a quick timeframe. These funds can cover the costs of property, equipment, and inventory on a cannabis or hemp farm or help cannabis companies expand their business. Borrowers might need to secure funds in order to maintain a grow house.

Other loan options include:

  • Working capital loans: These unsecured loans provide cannabis companies with the funds they need to hire and manage staff and carry out day-to-day business tasks.
  • Real estate loans: These secured loans let cannabis companies use real estate as collateral for a loan. The amount a business owner can borrow will vary depending on the lender, but real estate loans could be worth hundreds of thousands of dollars or more.
  • Dispensary Cash Advance: This lending option provides cannabis companies with the funds they need to support their inventory and purchase new equipment. Borrowers will receive a cash advance and have to pay this back at a later date.

Borrowers can compare different lending options by using a loan comparison tool. Here, business owners can view various financial products in one place and choose the right loan based on their budget and individual circumstances.

Which Cannabis Companies are Eligible for a Loan?

Different financial institutions have different criteria when assessing borrowers for eligibility. Typically, cannabis companies need to be in operation for at least six months before they can secure finance. (They might be incorporated as an S corporation, limited company, or LLC). These companies will need to have a good credit score, too.Business owners who have a good credit rating will be able to apply for loans with low interest rates and more flexible repayment terms. Business owners who have a poor credit rating, however, will have to apply for loans with higher interest rates and will have less choice. Cannabis business owners should always check their credit rating before they apply for a loan. This way, they can check previous financial commitments and apply for a product based on their financial history.Other eligibility requirements include a solid business plan and no criminal record.

What Should Borrowers Look for When Taking Out a Loan?

Borrowers will need to consider a number of factors before taking out a cannabis and hemp loan. Ultimately, business owners should choose a loan provider who offers good value for money and low interest rates. This will make the loan more affordable in the long run. Business owners should also choose a company that has a number of communication options (phone, email, live chat, etc.), which will make it easier when discussing the terms of the loan or making repayments.

Borrowers should also check out the repayment terms on a loan. Usually, business owners will need to repay their loan on a monthly basis. Late payments, however, could result in additional fees. Lenders will penalize borrowers who are unable to keep to the terms of their cannabis loan and can report late payments to one of the three credit reference bureaus in the U.S.: Equifax, Experian, and TransUnion. This could make it more difficult for borrowers to apply for finance in the future.

As more states legalize cannabis and hemp for medical and recreational use, more people will start marijuana-related businesses. Many of these people will require funds to kickstart their new venture or cover a shortfall in funds. This is where a good loan product can help. Choosing the right loan with the right interest rates and repayment terms can help a business manage their finances and get quick access to the funds they need.

August 21, 2019 / by / in
Finding the Best Financial Services in the Cannabis & Hemp Industries

The legal status of hemp and cannabis has certainly improved recently, but growers and distributors may still have difficulty finding financial institutions who want to do business with them. Federally insured banks are not allowed to deal with the cannabis business, and other institutions don’t always want to take the risk. Hemp’s newly federal legal status should open up financing for those in that industry, but change can be slow. Also, no one knows for certain how profitable hemp will be. Although those in the industry may struggle to secure financial services, it’s not impossible. They just need to know where to look.

Cannabis Financial Issues

Although cannabis has become legal in many states for medical and/or recreational use, many banks will not touch the industry. Federally insured banks are prohibited from dealing with cannabis because it is still illegal under federal law. That means even in Colorado or California where cannabis is widely accepted, growers and distributors have to find alternative financing. In some instances, banks might consider loaning money for growing equipment but not the seed or plants. Not only that, business owners cannot even keep their money in an FDIC bank without risking legal action for money laundering.

Cannabis Financial Solutions

Those in the industry have become quite adept at working around financing difficulties. Some companies now specialize in providing cannabis loans. Those wanting to open their own business may also use the following methods:

  • Real estate loans – If you own property, you can use it to secure a loan and then use that money for your cannabis business.
  • Crowdfunding – Small investors are allowed to put up to $2000 each to get a stake in your business. You may choose to use Fundanna, a platform that specializes in the cannabis industry.
  • Private equity firms – Some of these businesses will offer you short-term loans at a high interest rate for your business.
  • Venture capitalists – With some work and luck, you might find a wealthy investor willing to put up the money for your business, but you’ll be giving over a significant portion of your company.
  • Personal loans – If you have strong credit, you might be able to get a personal loan that you can then put toward your cannabis enterprise.
  • Home equity loans – You can also try to get a line of credit against the value of your home and use that cash to fund your cannabis business. Of course, you will be risking your home, so give that option careful thought.

Cannabis Cash

Storing cannabis profits is a problem due to the FDIC regulations, but keeping all that cash at home or at the business is definitely dangerous. Fortunately, some small banks and credit unions have begun accepting money from the industry, giving entrepreneurs discreet access to bank accounts. Of course, many people may simply deposit small cash amounts into their “regular accounts” over time, but that strategy comes with inherent dangers, including charges for money laundering. Openly investing cannabis profits may still pose problems for those in the business. Any financial endeavor with federal ties opens up the legal question once more.

Cannabis Insurance

Those in the cannabis industry can find business insurance coverage, which is vital to maintaining a thriving business. Many growers suffered huge losses in recent years due to forest fires in California and hurricanes in Florida. Since cannabis is not eligible for federal crop insurance, these private insurance companies are a necessity for growers and sellers. They also provide liability coverage, which protects members of the industry in case of lawsuits.

Hemp Financing

The financial status of hemp has changed drastically in recent months. Since hemp has legal federal status, FDIC institutions are no longer prohibited from offering growers and distributors financial services. In fact, hemp is now eligible for federal crop insurance. The only issue with financing may be timing. The financial industry is still adjusting to hemp’s new status, so services may lag a little. Still, the issues that still plague cannabis no longer apply to hemp.

420Property.com

420Property.com is one of the best-known sites for connecting growers and distributors to financial services including real estate loans, equipment loans, business loans and insurance policies. They also provide information on most aspects of the hemp and cannabis industry. New people can break into the industry, but they need to understand the difficulties first. 420Property keep pace with the latest developments and sources of revenue. They are dealing with competition these days as more companies involve themselves in the cannabis business. Financing, investing and simple banking services are challenges for the cannabis industry, although the situation is becoming easier with time. Of course, as long as cannabis is illegal according to federal law, difficulties will remain. Just finding a place to keep the profits is a problem for successful cannabis business people. Hemp producers, on the other hand, are going mainstream. As long as the industry proves profitable, they should be able to get financing as easily as producers of other crops do since they are no longer dealing with an illegal product. In time, cannabis too should join hemp as a totally acceptable agricultural, wholesale and retail endeavor.

August 21, 2019 / by / in
Cannabis & Hemp Real Estate Loans (After the Farm Bill)

The Agricultural Improvement Act of 2018 is now law, and the inclusion of the Cannabis sativa L. plant as an agricultural commodity in this new Farm Bill promises to have great impact in the Hemp Industry. This makes hemp a mainstream crop, and as with other crops, farmers will need land to grow it on and capital to produce it. This agricultural growth is expected to expand into improved financial services and real estate lending opportunities for hemp farming.

Hemp Then and Now

The production and possession of any cannabis plant, including hemp, was prohibited in 1970 due to the Controlled Substances Act, where it was classified as a Schedule I drug. However, the 1937 Marihuana Tax Act (now typically spelled “Marijuana Tax Act”) had already strongly discouraged hemp production over the preceding years. It wasn’t until 2007, that hemp farming officially returned to the U.S. through the issuance of hemp licenses to two farmers in North Dakota.

The 2018 Farm Bill will greatly expand hemp cultivation, though with extensive regulations. The previous Farm Bill of 2014, limited hemp production to small pilot programs for research and study purposes. The new law removes hemp from the Controlled Substances Act. Licensed farmers may now grow hemp for commercial purposes and other uses. The sale, transport and possession of hemp-derived goods is legal, subject to specific guidelines.

Some important restrictions apply:

  • Hemp may only contain up to 0.3 percent THC, the psychoactive compound found in marijuana that delivers the “high” effect
  • Annual inspections are required to test for the level of THC in hemp plants.
  • Individual states will share in the regulation of the production and cultivation of hemp. State plans are subject to approval by the Secretary of the USDA.
  • Licenses are required for hemp farming.
  • States must maintain a registry of industrial hemp farms.
  • Individuals with felony drug-related criminal convictions within the past 10 years may not participate in hemp farming.

Hemp is a profitable and sustainable crop with growth potential. Its new legal status spells possible relief for struggling farmers.

What About Cannabidiol (CBD oil)?

In June of this year, the Food and Drug Administration (FDA) approved an epilepsy drug called Epidiolex and the Drug Enforcement Agency (DEA) classified it as a Schedule V drug, its least restrictive classification. This is of great importance to the Hemp Industry because Epidiolex contains cannabidiol (CBD oil), and its manufacturer, GW Pharmaceuticals, performed scientifically controlled research through clinical trials to substantiate the effectiveness of CBD oil in its drug. The FDA’s approval of Epidiolex signifies official recognition of the potential health benefits of CBD oil. And with the Schedule V classification, this CBD-derived medicine has been placed in the same grouping as cough syrup with codeine.

When coupled with the passage of the new farm bill, this move by the FDA and DEA may signify a future for CBD oil products. The FDA continues to maintain its position against the use of CBD oil in food and dietary supplements, arguing that it’s a drug ingredient. But, research on the potential benefits of this hemp-based product is sure to increase, perhaps clearing the way for a new outlook for CBD oil.

The 2018 Farm Bill and Lending in the Cannabis Industry

In April, the U.S. Small Business Administration (SBA) made it harder for businesses in the hemp industry to qualify for business loans. At the time, their updated lending rules made hemp-related businesses ineligible for SBA-backed loans. Specifically, the guidelines ban companies that are involved in hemp cultivation, production, processing, and distribution and in the sale of hemp-derived products that are unlawful on the state and federal levels. This is a standard attitude in banking for cannabis-related businesses.

Historically, its been very difficult for companies in the cannabis and hemp industry to secure desperately needed funding. Laws preventing the federal government from punishing banks for providing services to the cannabis industry have failed passage repeatedly, making financial intuitions wary of doing business with companies in this industry. These banking shortcomings impact small business owners and entrepreneurs the hardest. The new Farm Bill may change all that.

The new law removes many of the legal restrictions that have limited access to the banking system for hemp farmers. Loans, federal subsidies, insurance and other opportunities will now open up in this industry. The SBA guidelines won’t hit licensed hemp farmers, because their business is now lawful. The previously high risks of dealing with cannabis-related businesses operating in hemp production and hemp-based products will be greatly minimized, encouraging financial institutions to invest in this lucrative industry.

Lenders love profit and hate risk. Now that the Farm Bill has removed many of its murky legal issues, lenders are free to cash in on this desirable commodity. Once the banks are on board, credit card issuers won’t be far behind. Soon, big players in retail will invest. This will make hemp farming even more attractive to financial institutions. As a high-value, high-growth market, the hemp industry has great potential.

Cannabis Real Estate Lending

Along with the provision of other financial services, the availability of real estate loans should increase in the hemp industry. Now that Cannabis plant growers can insure their hemp crops, lenders are likely to feel better about extending real estate loans to farmers. With the move to lawful use and interstate distribution of hemp products, manufacturers, distributors and retailers in this sector don’t pose the risk they once did. Contracting with these businesses to meet their real estate needs is more likely to be viewed as a smart business decision. With the passage of the 2018 Farm Bill, the future is looking far brighter for the hemp industry

August 21, 2019 / by / in
Cannabis Banking and the Potential Impact on the Real Estate Market

The cannabis market is thriving in the United States. This substance is now legal in 33 states plus the District of Columbia for medical use. Another 11 states have legalized it for recreational use, with Illinois being the latest to pass this legislation. This legal change has opened up potentially lucrative business opportunities, including those in the real estate market. Those in the cannabis business need land for growing, processing and selling their product, so the real estate market should benefit from the current cannabis-friendly landscape.

Unfortunately, under federal law, the sale and distribution of cannabis are still illegal, and while federal law enforcement currently isn’t bucking state law on this issue, that legal status does have a chilling effect on banking and real estate transactions. Interested entrepreneurs have to be creative in order to prosper in the cannabis business. That’s why the current proposed legislation in the House and Senate is so important.

Real Estate Issues

The conflict between state laws and federal law can make standard lease language problematic. Most of these documents require that the leaseholder not pursue any illegal activity on the premises. Landlords may be hesitant to enter into a lease with a cannabis business because of this provision. Those who are seeking a lease for a cannabis operation may fear it could be terminated if the landlord decides to enforce this provision even though the state has legalized the business.

Growing, processing and selling cannabis also requires extra security. Because the industry is still largely a cash business, it is particularly tempting to robbers. Installing proper security measures is expensive. Also, the fear of crime may give landlords pause.

Getting liability and property insurance can still be difficult due to federal law. Many mainstream companies will not touch the industry, but there are businesses that cater to cannabis coverage. In particular, getting title insurance has been an issue for those buying land for cannabis purposes. Without title insurance, getting real estate loans can be early impossible. Unless buyers can swing cash-only purchases, taking care of the real estate issues is daunting.

Banking Issues

Banking issues are perhaps the biggest challenge to the cannabis industry. Most banks are insured by the federal government, so they are bound to follow federal law over state law. As a result, they cannot lend money to cannabis entrepreneurs. In fact, they don’t allow cannabis businesses to have checking or savings accounts for fear they will be accused of money laundering by the federal government. While there are other options for financing, they are less appealing than going with traditional banks. This situation means that cannabis operations are still largely cash operations, which makes them vulnerable to theft and hard to insure. For years, lawmakers were reluctant to address this issue, perhaps because cannabis still seemed nefarious in some way. But now that it has gone mainstream, legislators are trying to address the banking problems.

Secure and Fair Enforcement Banking Act

Oregon representative Jeff Merkley is sponsoring the Secure and Fair Enforcement Banking Act, or SAFE. This bill would stop federal banking regulators from punishing banks that worked with legal cannabis companies. In addition, the bill would also protect associated businesses, such as builders, equipment providers, etc., from being charged with federal crimes. The proposed law has support in both houses of Congress, and the House of Representatives should be voting on the bill later this year.

The Senate held a hearing on cannabis banking reform on July 23, 2019, where legal experts and industry representatives testified to the need for cannabis banking reform. Although the passage of the act is not certain, there appears to be significant support for it.

Federal Legalization of Pot

Of course, these banking and real estate issues would be largely solved if the federal government would simply make cannabis legal. In July, the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security debated cannabis reforms. Also, two Democrats, Jerry Nadler, the House Judiciary Committee Chair, and Senator Kamala Harris, current presidential candidate, will be introducing a bill to decriminalize marijuana on the federal level. Although decriminalization of marijuana is not the same as legalizing it, such a law should relieve the banking industry of its current cannabis lending restraints.

Rising Land Values

There is plenty of good news for the real estate market due to cannabis legalization. Property in areas with established cannabis businesses is increasing in value. Multiple studies have shown that dispensaries in the neighborhood also have this positive effect. In fact, property values jump when the state government simply legalizes cannabis.

This trend applies to warehouse demand as well. Data shows that demand for warehouse properties rose by 34% in states where medical cannabis is legal and by 27% in states where medical and recreational use is legal. These states also saw a rise in demands for cropland and storefronts. Cannabis is good business for all property owners.

The path toward cannabis legalization has been long and hard. Inevitably, the movement to legalize it at the state level has given rise to many investment opportunities, and business people are making money – often a lot of money. Sadly, the conflict between federal and state laws has left cannabis as a “sorta” legitimate business. The threat of legal action hangs over the head of everyone involved in these businesses and keeps banks and landlords from becoming part of a lucrative industry.

As more states completely legalize cannabis, the pressure for the federal government to do the same increases. Federal opposition seems contradictory and even hypocritical to many advocates. Even previously anti-cannabis people, like former Speaker of the House John Boehner, have jumped on the weed wagon, largely because they see the profit potential. Land values in cannabis-legal states are rising. The cultural climate is changing. Cannabis entrepreneurs still face obstacles, but the way to a successful business is becoming clearer and property values are also likely to continue to rise if cannabis companies have access to banking and loans.

August 1, 2019 / by / in
How to Find Funding for Your Cannabis or Hemp Startup

Owning a businesses is part of the American dream. While some businesses, such as Apple, are excellent examples of this dream, for most people the reality is less glamorous, especially when in the cannabis, hemp, or CBD industries. However, cannabis & hemp startups can still be quite successful, but require proper funding an capital.

For any startup venture, finding funding is a major concern. No matter how great the idea or product, traditional banks are not going to fund it! Why? For non cannabis and hemp businesses, more than 50 percent of small businesses fail in the first four years. Of those businesses that do fail, 82 percent do so because of cash flow problems. These numbers are even higher in the cannabis and hemp That’s why entrepreneurs have to seek reliable sources of investment money elsewhere.

Venture Capital

Venture capital is simply financing from investors looking for companies that can provide a good, long-term return on their investment. This type of financing can come from individuals, investment banks, and other sources. The risks are high for these investors, but they can also reap excellent financial benefits. In return for this funding, the investors usually receive equity in the company, which means they have some decision-making power in the business.
Finding venture capital for startups is a popular but competitive choice. Also, many venture capital sources prefer to invest in tech companies, so those startups not in that realm may need to seek funds elsewhere.

Angel Investors

Finding an angel investor is another way to fund your startup. They are generally individual investors looking for profits of 25% or more on their money. In return for providing financing, they usually receive a equity position in the company.
An angel investor provides startups with the cash they need without forcing them to incur debt. If the company fails, the angel investor does not have to be paid back. However, the business owner does lose some control of the company, something that does not happen with traditional debt financing.

Business Incubators

Business incubators are organizations that work to help startups and new businesses launch and become productive. The incubator members offer connections to various types of funding and also offer business guidance. They involve themselves with the business plan and work to help the companies grow. Collaborating with an incubator offers some solid benefits, but entrepreneurs may lose a bit of control over the company vision if they go with this source of funding too early in the process.

Crowdfunding

Crowdfunding is still a viable option for some startups. Kickstarter, Indiegogo, and others have helped launch some successful companies, however, this may not be an option for for plant-touching cannabis or hemp businesses, as many main stream Crowdfunding platforms prohibit businesses that break Federal Laws.
The competition for crowdfunding is now intense, so a startup has to work hard to capture the imagination of potential backers. It the idea isn’t sexy, backers will overlook it.

Family and Friends

Getting startup money from family members and friends has its advantages. These people are already disposed to believe in the business owner and want them to succeed. The terms of these loans are often quite favorable, with only modest returns expected on their investment.
To protect everyone, these loans need to be official, with each party concerned receiving proper legal counseling before signing the papers. Even so, taking money from friends and family can cause hard feelings, particularly if the business fails.

Self-Financing

Many people finance at least part of their startup needs by “bootstrapping,” which involves using their own money. They may use their savings, their retirement funds, a second mortgage, etc. to get their new cannabis or hemp business off the ground. In fact, some people put all of their financial resources toward financing their dream.
Of course, self-financing can be quite dangerous since so many startups fail. The business person can end up with no company, massive personal debt and may go bankrupt.
While some startups take off, making their founders and investors a significant amount of many, many fail in the first few years. This risk makes acquiring startup financing challenging, but finding investors can be done, particularly for exciting and innovative ideas. While those in the tech field have an advantage in the venture capital area, others can secure financing in alternative ways, including through grants, angel investors, incubators, etc.
Whenever possible, startups should look for outside funding. Finding this funding can be a long and frustrating process, but it greatly lowers the risk to the startup founders.
May 21, 2019 / by / in
Cannabis and Hemp Industry Loans

The cannabis and hemp industry is no longer an underground enterprise due to changes in state laws and the acceptance of marijuana as a medical treatment and recreational substance. While growing and selling these plants is still illegal in some areas, in others, it has become a profitable and aboveboard business. Since legal issues do still exist, financing these businesses can be tricky, but several financing options do exist.

Cannabis and Hemp Basics

The overall cannabis market is expected to hit $25 billion by 2025. The market for hemp-derived cannabidiol (CBD), a product touted for its medical uses, should hit $1 billion by 2020. The entire industry is booming, in part because the medical community has started to embrace the health benefits of both hemp and marijuana.

The legal landscape has changed as well, with states like California and Colorado completely legalizing these substances. Other states such as Illinois have made medical marijuana legal and decriminalized recreational use. States such as Texas, Oklahoma and Kentucky still make cannabis and hemp use illegal for any reason.

The federal government also considers their use a crime, but under the Obama administration, state laws were recognized and federal law enforcement did not intrude. Current Attorney General Jeff Sessions seemed poised to enforce these laws, but the Trump administration has since backed off this stance, much to the relief of those in the industry. However, this contradiction between state governments and the federal government makes acquiring funding for cannabis and hemp production and sales more difficult.

Financing Options

For those who want to break into the industry, getting a bank loan is highly unlikely. Most banks are insured by the FDIC, or Federal Deposit Insurance Corporation. The FDIC will not insure any bank that loans money to companies that break federal law, so that eliminates the entire cannabis hemp industry. Some FDIC banks will loan money for equipment since that is a step removed from the actual product. Fortunately, those interested in the business can secure other forms of financing.

Hard Money/Private Investors

Some private investors actually specialize in cannabis and hemp hard money loans as well as other high risk ventures. Collateral for these hard money loans is based on the real estate in question and not on the borrower’s current financial status. The lenders will set some borrower qualifications, although these will be less stringent than a traditional bank’s requirements. In general, hard money lenders are a source for business owners who cannot get regular funding due to poor credit scores or those engaged in a controversial enterprise such as cannabis.

Those using hard money loans to start their business should expect to pay their lenders significantly higher interest rates, well over 10%, and have a short term to repay them, usually a year or two. At the end of the term, the loan must be repaid or other financing secured. Until the balance is due, the borrower only makes interest payments, which is a significant advantage for borrowers. The short-term nature of the loan is often sufficient to launch a business start-up.

Some private investors deviate from this formula and provide start up money in exchange for part ownership. In most of these cases, the borrower retains the power over day to day operation decisions, a long term arrangement that can benefit both parties. This arrangement also gives the borrower more time to make the business profitable.

In both instances, the loan application process should be fast and efficient, taking less time than a bank’s more complicated procedure and allowing the business to begin operations quickly.

Niche Business Loans

Niche business loan companies are another option for small businesses in general and cannabis entrepreneurs in particular. These loans frequently work for those who cannot get bank financing and need quick access to their funding. Like most financing options, using one of these companies has both advantages and disadvantages.

Applying for these loans is extremely convenient and can be done from home at any time. Also, when borrowers provide their financial information, they are making it available to a number of lenders, but their credit score doesn’t suffer since only one source is accessing their credit report.

Borrowers also are able to compare all of their options at once and find the best terms possible, reducing their loan costs.

The major disadvantage is the interest rate. Like hard money loans, the rates are significantly higher than bank loans. Also, these loan companies are relatively new, so they have a higher chance of failing than other, more established lenders.

For those entering the cannabis/hemp business, online business loans may be a good option. However, the interest rates and other terms range widely with these companies, so borrowers need to carefully research the loan before signing any loan contracts. They should also check out the company’s reputation and history before entering into any agreements.

The cannabis/hemp industry is thriving and promises investors a healthy return on their money. Since there are federal legal issues, finding financing can be complicated. Most banks will not loan money to borrowers for this purpose, so they will need to turn to private investors, hard money loans, and home equity loans. In some cases, private investors will assume part ownership in return for their money.

The federal government has shown recent signs of softening on this issue, so borrowers may be able to acquire bank loans in the not-too-distant future.

Search cannabis and hemp property and business financing options on LenderMatrix by using the property type or business industry search filters.

Get Financing

May 21, 2019 / by / in
Cannabis & Hemp Licensing. Issues, Rarity, and Value

Though marijuana and hemp both come from the cannabis family, they are completely different plants. They look different, are cultivated differently and have vastly different uses. Most notably, marijuana contains levels of tetrahydrocannabinol (THC) higher than 3% — typically between 5%-10%, but it can be higher. This chemical is what delivers the psychoactive “high” effect. Hemp contains 0%-3% THC levels and is not psychoactive.

Unfortunately, the federal government has a history of grouping marijuana and hemp plants together under a general Cannabis species. However, recent changes are impacting this approach. And the legalities and licensing for production and sale of these “crops” vary greatly throughout the United States.

As of April 2019, marijuana is still completely illegal in 16 states. In 10 states and the District of Colombia, it’s fully legal. The remaining 24 states have legalized medicinal marijuana, but decriminalization of recreational use varies. These differing laws greatly impact licensing requirements, rules, and regulations in the states where some form of marijuana use is permitted.

Industrial Hemp is a different story and one that has changed with the passage of the 2018 Farm Bill. Hemp is now legally categorized as an agricultural product. But specific restrictions apply, requiring a great deal of oversight in its cultivation and sale. Individual states must submit plans to the federal government detailing how they plan to regulate its production and compliance with federal law. This includes licensure for growers.

Fledgling Hemp Licensure Across the U.S.

In 2018, 38 states considered, or proposed laws related to industrial hemp. The following states passed new legislation:

  1. Alaska
  2. Arizona
  3. Kansas
  4. Missouri
  5. New Jersey
  6. Oklahoma

Several states already had programs in place under the previous Farm Bill that allowed specific research and pilot programs for industrial hemp. Only a few states are still lacking legislation allowing hemp cultivation. But it’s still early days yet with respect to the new Farm Bill, and most state legislators are moving forward with laws to govern the new crop. For example, Connecticut just introduced two bills designed to allow commercial hemp farming in the state. Texas and Idaho are making similar legislative moves.

The Varied State of Cannabis Marijuana Licensing in the U.S.

For marijuana licensing, the landscape is even more confusing and varied. As mentioned previously, this is because of the lack of a federal or universal law regulating marijuana cultivation and sale. And, in fact, federal law still treats marijuana as an uncontrolled substance. But most individual states do not. So currently, state, county, and city level licensing are controlling law in each jurisdiction.

General Requirements

Getting a license for a cannabis-related business is difficult in any state where it’s legal. In addition to jurisdictional variances, requirements differ based on the type of marijuana business being licensed – be it for cultivation, retail sales, medical dispensary, or other uses.

At the ground level, general business licensing basics must be addressed. These typically include the following:

  • Forming an LLC or incorporating the business
  • Creating a Business Plan
  • Requesting a federal Tax ID number / employer identification number (EID)
  • Obtaining a general city or county business license (does not take the place of a cannabis operating license)
  • For retailers – getting a Sales Tax Permit
  • Obtaining Permits, as required by law

To operate a business that deals with marijuana, there are several additional hoops to jump through. And the licensing entity for these businesses also varies. A few examples follow:

  • Secretary of State’s Office
  • Department of Taxation (Nevada)
  • Department of Revenue, Marijuana Licensing Authority (Colorado)
  • Bureau of Cannabis Control (California)
  • CalCannabis Cultivation Licensing (California)
  • Manufactured Cannabis Safety Branch (California)
  • Department of Health, Office of Medical Marijuana Use (Florida)
  • State Liquor and Cannabis Board – LCB (Washington)
  • Medical Marijuana Commission (Arkansas)
  • Department of Consumer Protection (Connecticut)

Specific marijuana-related business licensure requirements are onerous. Regardless of where the marijuana business is meant to operate, getting a license is a long, involved, expensive process. There are timeframes and deadlines to abide by. Most states require residency for a set minimum of time before applying for a marijuana license. In some states, like California, operators must obtain both a local and state license.

Entrepreneurs must review the laws in the state and county where they hope to obtain a license to learn whether they need to follow “seed-to-sale” rules or if they’ll only be permitted to operate one type of marijuana business. And everyone involved will likely be subjected to background checks. These are just a small sampling of the obstacles hopeful marijuana business owners will run into.

Fees

Licensing fees are another area of great inconsistency. For example, in Alaska, a limited cultivation facility license for smaller than 500 feet combined with a new application fee only runs $2,000. Yet, in Arkansas, a cultivation licensure fee is $100,000 and requires a $500,000 performance bond. Some states have steep annual renewal fees — $75,000 cultivation renewal fee in Connecticut and a $100,000 annual cultivation fee in Illinois. Detailed state comparisons are needed to establish the most favorable investment for each individual entrepreneur.

Rarity

Costly fees and complex legal requirements aren’t the only challenges in getting a marijuana business license. It’s also a very competitive field. Despite high consumer demand for marijuana, the supply side is heavily suppressed. Even in states with legal medical and/or recreational marijuana, there are numerous in-state jurisdictions that don’t allow the commercial sale of marijuana and edibles.

In California, only 118 of the state’s 481 cities permit recreational marijuana retail stores. Caps on the number of licenses allowed in applicable jurisdictions further complicate the supply and demand issue. Florida’s medical marijuana businesses have been in flux over this capping issue. The state currently permits medical marijuana (though there are legislative proposals in the State House to also allow recreational use and sales) but initially severely limited the number of medical marijuana dispensaries. An August 2018 court ruling successfully challenged the cap. The number of licenses is expected to grow in the future. However, gridlock is still a big problem due to the ongoing litigation. Regulations banning smokable medical marijuana and undetermined laws overseeing edibles are even further complicating things.

Value

Since demand is greater than supply in the legal marijuana market, the value of these licenses has been skyrocketing. San Diego, California, marijuana retail licenses are reselling between $5 and $17 million. In Florida, the statewide number of medical marijuana dispensaries grew from 24 to 78 in 2018. But high demand boosted their value, and licenses for these businesses have resold for as much as $50 million.

In Washington, the purchase of a cannabis business doesn’t include the license, since the Washington State LCB doesn’t categorize these licenses as transferable assets. These types of issues naturally impact the value of cannabis business licenses in other jurisdictions.

Overall, the complications involved in obtaining a cannabis business license make them a rare commodity and drive up the value. This trend isn’t expected to change anytime soon. The number of states with legal marijuana use may increase, but the demand is still much greater than the projected supply. The value of these licenses will likely only continue to grow.

April 30, 2019 / by / in
How Real Estate Agents and Brokers are Cashing-In on Cannabis and Hemp
Although at first thought, it may seem to be an unlikely pairing, those working in the real estate realm stand to benefit substantially from learning about the cannabis and hemp industry. Indeed, while this certainly would not have been plausible just a decade ago, we are now in a time in which the restrictions are being lifted on cannabis and hemp products across the country. That said, the following is a closer look at how real estate agents are starting to learn about the cannabis industry as a means of earning large commissions for conforming to the needs of the cannabis community.

The Cannabis Industry Conundrum

As mentioned, for real estate agents in certain areas, now is a perfect time to learn about and align yourself with the community needs of the cannabis industry. Although it seems to continue to be legalized at break-neck speed, the laws surrounding the industry have not been getting changed as quickly. In fact, while the right to medicinal and/or recreational use of cannabis continues to be granted to across this nation, the laws for growing and selling the substance remain murky at best.
Therefore, those who are attempting to sell and/or rent property for the purpose of growing and/or selling cannabis, tend to encounter a few hiccups throughout the process, to say the least. In order to sell more properties and to receive larger commissions, those working in real estate need to take the time to learn about the unique challenges facing those attempting to enter this industry and find every way to make the process as easy as possible.
Indeed, rather than waiting for the various surprises awaiting those who dare to venture into the cannabis industry, a professional real estate agent can and should take the time to familiarize themselves with the rules and regulations within their area. In particular, those attempting to purchase property in order to grow cannabis are likely to face the following issues:
  • Locating and Procuring the Facilities– Just as with all other industries, when it comes to finding the perfect property for the cannabis industry, location is everything. Indeed, in addition to making sure that the property is large enough for the undertaking, the property must also be compliant with both the local and state cannabis laws. Since cannabis is still illegal on the federal level, many property owners will not do business with those working in the cannabis industry. Therefore, much of the work with regards to securing a property lies in finding the right landlord/ seller for your needs.
  • Financing– Furthermore, finding financing can be equally if not more so difficult than finding the property to begin with. Once again, this is due to the overall issues with the legality of the cannabis industry. Although it has been proven that the cannabis industry can be quite lucrative, many banks and investors are reluctant to offer loans or investments for fear of legal ramifications.
  • Services Necessary to Operate or Grow their Enterprise– In addition to obtaining property and financing, those venturing into the cannabis business must also acquire the proper licenses. This is actually said to be a relatively difficult process best handled by lawyers and other professionals. Either way, although the process can be lengthy and tedious, those venturing into the cannabis industry usually seem to believe it is more than worth the trouble.

Cashing-In on Cannabis and Hemp

Given the various facts we now know about the cannabis industry in relation to real estate, becoming an expert to help others secure the proper property is a must. Luckily, 420Property.com is here to help. For those interested in helping customers finding property to operate a cannabis business, 420Property.com can assist in a variety of ways. For instance, if one is seeking listing services, 420Property is a great option. This is because those who frequent the site are typically seeking agents who are familiar with the cannabis industry in particular. Moreover, with paid and free services, users can either list their properties for free or pay for added exposure.
Overall, venturing into the cannabis industry can be a grand undertaking. However, by taking the time to familiarize one’s self with the ins and outs of the cannabis laws, this can help agents to stand out, obtain more clients, and of course, receive higher commissions. By staying abreast on the local and state cannabis laws in one’s area, real estate agents can rent and sell properties much more effectively. Moreover, sites such as 420Property.com can be instrumental in helping to advertise, rent, and/or sell properties to interested prospects. Rather than taking on the task of advertising one’s services in this risque market, using a site such as 420Property.com can help real estate agencies by offering targeted advertisements to those who are already seeking the services they are offering. Although the laws vary from state to state, the need for quality leads and advertisements is universal.
Contact 420Property today to find out how to start advertising properties for free! 
April 12, 2019 / by / in
Can Your Property Be Used for Cannabis or Hemp?

Hemp and cannabis are considered cousins in the agricultural world, and that relationship has been harmful to hemp, the relative that cannot get you high (at least not without a lot of effort.) In reality, the THC in hemp must stay below .03%, making it a really ineffective recreational drug. The U.S. government has greatly restricted both hemp growth for decades, but now, with the passage of the 2018 farm bill, hemp is poised to become a major crop once more.

Marijuana growers also have much to celebrate with the loosening of restrictions in many states. Cannabis is still illegal on the federal level, however, so growers have to be extremely cautious before producing a crop. All of these restrictions can be confusing to those who want to legally grow hemp and/or cannabis. Before you invest in a crop, you need to do careful research into your state’s laws.

Hemp Regulations

Hemp is now a legal crop on both the federal and state level. To many, that may sound as if anyone can grow hemp if they wish. Unfortunately, that’s not the reality. Hemp is still regulated and the law requires that you get a license from your state before you make it part of your crop rotation. The cost and restrictions of the license will vary according to where you reside. As with tobacco, farmers cannot just decide to grow it for sale but must follow state guidelines.

The federal law also did not make it legal to grow hemp for personal use. Experts speculate that those with a license to grow cannabis at home could substitute hemp plants, but the number allowed would be so small that there is little practical reason to do so.

Hemp Growing Conditions

Hemp is an especially easy crop to grow and does well in most parts of the United States. The only areas not conducive to a strong hemp crop are high mountain and desert areas. This plant grows fast and thick, muscling out weeds. Hemp requires less water, pesticides and fertilizer than corn. It is an environmentally friendly crop that does best in warm climates and well-drained soil. The seedlings do need irrigation for their first six weeks if conditions are dry. Overall, growing hemp is easier for the farmer and better for the environment than many other crops.

The profit potential is still not clear since large-scale hemp farming has largely been squashed since the 1930s. The next few years should tell the tale in that area. Hemp is used to produce CBD oil which experts believe has a number of health benefits, including pain relief. Tens of thousands of other products can be made with hemp, so the demand is certainly there.

Cannabis Regulations

Cannabis is still illegal under federal law. You can only grow it under certain conditions in a number of states. The bureaucracy governing its growth is far more complex than that for hemp, particularly since hemp has now been made legal under the 2018 farm bill. Plus, the rules for residential cultivation are far different than for those raising it at an industrial level. However, the cannabis industry is exploding and is proving highly profitable for many.

Residential growers in states where it is legal are allowed to cultivate a few plants. For instance, California allows residents to grow up to six plants per year.

Cannabis Growth Conditions

Industrial cultivation of cannabis can be done both indoors and outdoors, and some farmers are already deeply invested in the production of this crop. Successfully growing marijuana requires dedication and skill in order to produce the different strands desired by consumers. Some agricultural leaders are looking to shift more of their production outdoors, which will “explode” yields and make the enterprise more profitable, even with the current red-tape nightmare involved. Experts note that water usage may be one of the bigger challenges, depending on where the field is located. Growing cannabis is a more delicate process than growing hemp since honing the psychotropic effects are a main goal of production. Hemp is used to produce goods and CBD oil while cannabis is used to produce a recreational high and to deliver certain medical benefits such as pain relief and anti-nausea effects.

Depending on your state of residence, you may be able to openly grow marijuana for your personal use and as a cash crop. These efforts are not legal on the federal level, but currently, the US government’s policy is to defer to state law and not seek enforcement of the federal law. Following the law means keeping current with your state’s regulations, which should be spelled out on your state’s official government website.

Hemp is legal to grow in the United States, but you will need a permit to grow it. Fees and regulations vary by state, but once you are licensed, you can begin raising hemp in the next growing season. You may not simply buy seed or seedlings and put them in the ground without filing the proper paperwork, however.

Hemp may soon become a major crop for U.S. farmers. In some states, cannabis is already a profitable crop endeavor. Once the federal government legalizes cannabis, which seems inevitable at some point, you can expect to see it as a row crop in many parts of the country.

Cannabis Sales, Processing, and Distribution

The sale, processing, and distribution of cannabis are heavily regulated in States that it’s allowed. Some Cities in legal states may ban cannabis business actives all together or may only allow the sale of cannabis but not the cultivation (or vice versa). Before entering the cannabis industry, its important to become familiarized with your State and local cannabis business requirements, including the allowed (and banned) activities, licensing, and property requirements.

So, How Do You Know if You Can Use Your Property for Cannabis or Hemp Use?

  1. Check State Laws: Just because hemp is legal on a Federal level doesn’t mean that your State allows hemp business activities, check with your State government for requirement. As for cannabis, if you are in a State that allows cannabis business activities, check with the State regulator for requirements for operating a cannabis business. Generally, you want to find out the following:
    1. Licensee Requirements—Some State have restrictions on who can apply to operate or own a cannabis business.
    2. Allowed Activities—Some States have restrictions on business actives such as: Outdoor cultivation, brokering cannabis, cannabis transportation across county lines, production of cannabis infused candies and more.
    3. Licensing Requirements and Fees—Find out all the requirements to apply for a license, over all process, timeframes and of course, the FEES.
  2. Check Local (City & County) Requirements—Local governments may also develop their own rules on cannabis and hemp business activities and have their own licensing requirements that you may need to meet in ADDITION to the States requirements. The best place to start would be the local Economic & Development department/ office (wherever they issue business licenses or building permits). Find out:
    1. Allowed Activities;
    2. License Requirements; and
    3. Property Requirements/Restrictions—Each business activity will generally have specific property requirements, such as zoning, required setbacks (required number feet away from schools, churches, and residential dwellings, etc.), and security requirements. Some cities, such as Los Angeles and San Francisco have developed specific areas specifically for cannabis, commonly referred to as “Green Zones”

These are just some requirements, those interested in entering the cannabis & hemp industry are urged to do their due diligence beforehand.

To find cannabis and hemp properties or existing businesses for sale, visit 420Property.com.

April 12, 2019 / by / in
SAFE Banking Act–Will it break open the flood gates for the cannabis & hemp industries?

Lawmakers are again attempting to clear a legal path for the cannabis industry. New legislation, called the SAFE Banking Act, is making its way through Congress. If passed, it will give marijuana and hemp businesses some of the legitimacy they so desperately need to be competitive and successful.

What is the SAFE Banking Act?

H.R. 1595 is the Secure and Fair Enforcement (SAFE) Banking Act that may give the cannabis industry a seat at the table with Big Business. It’s a bipartisan bill initially sponsored by Colorado Representative Ed Perlmutter and Washington Representative Denny Heck. But it has the supportive sponsorship of more than one-third of the House of Representatives. At last count, the bipartisanship only included 13 Republicans.

Currently, banks may be criminally prosecuted for dealing with marijuana growers and dispensaries. This is because the federal Controlled Substances Act categorizes cannabis as an illegal Schedule 1 drug. Marijuana is legal in 33 states and the District of Colombia – predominantly for medical purposes. However, 10 states and D.C. also permit recreational use. These states license and regulate legal cannabis businesses. Yet, banks steer clear of these legitimate operations due to federal law.

This bill removes the legal restrictions that prevent banks from doing business with cannabis-related operations. Federal financial regulators would no longer be able to take adverse actions against financial institutions that provide services to cannabis-related businesses operating in compliance with their individual state laws. This includes terminating the bank’s share insurance or deposit insurance. With the backing of federal law, financial institutions will be able to provide legitimate banking services to businesses in the marijuana and hemp industry.

Is the SAFE Banking Act Law Yet?

The Act is not yet law. And in fact, there’s no guarantee that it ever will be. Skopos Labs – an automated predictive intelligence agency — estimates that it has a 29% chance of passing Congressional approval to become law.

The legislation started in committee in the U.S. House of Representatives. The House Financial Services Committee voted 45 to 15 in favor of the bill on March 28, 2019. Next steps will be consideration and a vote by the full House of Representatives. The Senate is expected to introduce a companion bill. Both chambers must vote in favor of the legislation, and the President will then need to sign it before the SAFE Banking Act can become law.

Some Representatives are skeptical of the bill. NC Representative Patrick McHenry has called for more investigation into the impact the law will have. Previous bills of a similar nature have failed. A 2014 appropriations bill included an amendment that addressed this issue, but H.R. 5016 met opposition in the Senate. In 2017, S. 1152 and H.R. 2215, also called SAFE Banking Acts, stalled in committee.

That this most recent legislation, H.R. 1595, has successfully moved out of committee is a positive step forward. Plus, a February hearing on the matter, the first of its kind, demonstrated a renewed interest in removing cannabis banking restrictions. Morgan Fox of the National Cannabis Industry Association expressed optimism about the future of the bill. He noted that the February congressional hearing was very positive.

Many organizations are vocally supportive of the law. They include:

  • American Bankers Association (ABA)
  • Credit Union National Association
  • Independent Community Bankers of America
  • Electronic Transactions Associations
  • National Cannabis Industry Association (NCIA)
  • Mid-Size Bank Coalition of America
  • Real Estate Roundtable
  • American Land Title
  • American Property Casualty Insurance Association

Hopes are high in both the cannabis and the banking industries.

What the SAFE Banking Act Offers the Cannabis Industry

Cannabis cultivators and businesses have been operating on a cash-only basis. Even though, it’s a multi-billion-dollar industry. This leaves them vulnerable to theft and other dangerous crimes. Employing secure cash handling and storage measures is dangerous and costly.

Basic business practices that are available to other legitimate operations have been denied to the cannabis industry. These include POS systems, credit card processing, payroll services, and property rentals. Even paying taxes is burdensome without the use of traditional banking services. Some vital banking operations that will be available to the cannabis industry with passage of the new law include the following:

  • Authorizing payments
  • Processing transactions
  • Billing
  • Financial transfers
  • Reconciliation
  • Payment collection
  • Clearing transactions
  • Extension of credit
  • Payment cards
  • EFTs
  • Check processing
  • Deposit accounts

Financial institutions can establish relationships with legal cannabis growers, manufacturers, distributors and other related operators and third-party vendors. It will also open the door for multiple financial industries.

These changes will give businesses in the cannabis industry far more growth opportunities. Access to credit and loans will support expansion and competitiveness. Customers can use a variety of payment methods, which will undoubtedly increase sales. Payroll services will aid in attracting quality workers and employee satisfaction and retention. These positive factors have shown to help businesses be more successful. Additionally, with the dangers of cash-only operations removed, crime rates will decrease, and transparency will increase.

These changes will also help level the playing field on an international basis. Canada has leapfrogged over the U.S. in cannabis production and sales. This is largely due to legal restrictions in the U.S. that don’t exist in Canada. Listings, stock trading, marketing, and real estate transactions are a few of the areas that may also benefit from the SAFE Banking Act. Legal protections, legitimacy, lower risk, and transparency will all work together to make an investment in the cannabis industry attractive, lucrative, and smart business, overall.

Want Information on Cannabis & Hemp Banking Solutions? CLICK HERE!

April 11, 2019 / by / in