Cannabis & Hemp Insurance: Expectations for 2020

The hemp and cannabis industry experienced a few pleasant and not-so-pleasant surprises in 2019. Regardless, its value chain—primary, including seed providers and cultivators; secondary, comprising product manufacturers; and tertiary, consisting of retailers and supporting services providers—has flourished.

Cannabis/Hemp Industry in 2019

The amount of land that U.S. farmers are licensed to grow hemp has increased much more than in 2018. Hemp’s removal from the federal Controlled Substances Act via the 2018 Farm Bill and the ease of shipping it across state borders has further aided its production. Reports show that there is also a constant capital inflow into the cannabis industry.

In August 2019, the National Credit Union Administration allowed credit unions to serve compliant hemp businesses. The Food and Drug Administration is researching the safety of hemp-derived CBD. The Environmental Protection Agency is reviewing applications for hemp crop protection tools for 2020.

Federal drug authorities updated their guidance to reiterate that hemp is no longer a controlled substance. Now, 41 U.S. states have legalized hemp agriculture, which would raise employment in the industry. The industry will need not just growers or transporters but also personnel well-versed in finance, law, science, compliance, information technology, and more.

The industry is awaiting the fate of the Secure And Fair Enforcement (SAFE) Banking Act, which would give cannabis/hemp businesses access to traditional banking services and free them from insecure cash-only operations.

For now, federal regulators have stated that banks are not required to file a Suspicious Activity Report (SAR) on customers who cultivate hemp subject to applicable laws and regulations. Although banks do not have to accept hemp accounts, such clients can be treated like customers from other legal industries.

However, in the midst of all such positive developments, many publicly traded cannabis companies registered double-digit losses in the second quarter of 2019.

Opportunities for Cannabis/Hemp Insurance in 2020

Eligibility for USDA programs: Hemp farmers will be eligible for many United States Department of Agriculture (USDA) programs, including loans, some crop insurance policies, disaster aid and conservation schemes in 2020.

The USDA’s Risk Management Agency (RMA) has announced insurance coverage for industrial hemp growers from areas covered by hemp plans with USDA approval or who participate in approved state or university research. They can obtain insurance coverage under the Whole-Farm Revenue Protection.

USDA’s Agricultural Marketing Service (AMS) is formulating regulations for producing hemp and for submitting state, territorial or tribal plans. Once this process is complete, RMA, the Farm Service Agency (FSA), and other USDA agencies will announce the eligibility criteria for their programs, such as farm loans and disaster assistance. Farmers may also be able to buy FSA’s Noninsured Crop Disaster Assistance Program policies.

Legitimacy and rights: The USDA announcement will legitimize hemp as a row crop and may also help farmers to access other rights.

Availability of hemp products: With lesser federal regulations on manufacturing and distribution, hemp products will be easily available. Total legal sales of cannabis are estimated to reach around $66.3 billion by 2025.

New insurance carriers and policies: More insurance providers will enter the cannabis insurance arena. Businesses will enjoy higher liability limits. More outdoor cannabis crops will be covered, along with workers’ compensation for businesses. If the Safe Banking Act becomes law, more such opportunities may be possible.

Hemp growers, testing labs, and other organizations with access to sensitive product or personal data will need Health Insurance Portability and Accountability Act (HIPAA) compliance. They are legally liable to protect such data and may need cyber insurance policies.

Challenges for Cannabis/Hemp Insurance in 2020

The hemp/cannabis industry faces unique risks because it is young and has a quasi-legal status. Insurance has remained scarce and often unaffordable because insurers are not yet sure of the risk profiles of hemp/cannabis businesses.

Cultivation woes: Although hemp may bring farmers profits, growing it can be quite laborious. Many may not have the necessary equipment to cope with it. New machinery and retrofits can be expensive.

They also face many other problems, including seed fraud, thieves stealing plants mistaking them for marijuana, and oversupply. Apart from these, inclement weather and delayed plantingmay cause the harvest to be less than profitable.

Product liability insurance: The product liability premium rates for cannabis businesses may rise in 2020 because of the increasing E-cigarette or Vaping Product Use-Associated Lung Injury (EVALI) cases. Insurance providers may be stricter about underwriting and ask for insurance certification from vendors and additional insureds on third-party policies.

Preparation for future growth and expansion: As the initial excitement of starting up or entering the industry is dying down, businesses now have to take stock of further growth needs. Those who do not have good financial backing, robust systems, or well-managed processes may face challenges.

As many companies join hands to form multi-state operators, the U.S. Securities and Exchange Commission (SEC) or investors will scrutinize directors and officers to check the investments they made. This might increase the demand for directors and officers (D&O) liability insurance in the future. 

Regulatory testing: The standards for testing and grading of hemp/cannabis products in the industry are not uniform or reliable. Although many cannabis businesses standardize their ingredient labeling, some falsify labels, leading to lawsuits and claims. Penalties, fines, and non-compliance liabilities may increase if states start product testing and other regulatory activities.

Just like all other businesses, hemp/cannabis businesses also need insurance to protect their interests and handle liability exposures. They have had difficulties in obtaining it until now. However, the positive developments in 2019 and the work of agencies, such as Skyfront Insurance Services, which serve and protect compliant cannabis businesses bring hope to the cannabis industry.

December 24, 2019Comments Off
US Legislators Drop Burdensome Regulations That Kept Banks and Hemp Apart

When Congress passed the Hemp Farming Act of 2018, a lot of farmers, manufacturers, and retailers assumed that they could start selling their products just like other companies do.

These new businesses already had a lot of regulations to follow, such as ensuring THC levels below 0.03%. It didn’t take long before CBD and other hemp businesses discovered another roadblock.

Despite federal legalization of hemp, banks that worked with hemp companies needed to file “suspicious activity reports” about their clients.

Congress legalized hemp, but it still took a cautious approach that hurt the burgeoning industry from growing as quickly as expected.

Some banks filed their reports and continued working with legitimate hemp companies. Others didn’t want to deal with the extra work, so they decided not to accept hemp companies as clients.

Finally, Congress has found a solution that should benefit all parties.

What Are Suspicious Activity Reports?

All financial institutions are required to submit suspicious activity reports when they believe that a customer is using their services to launder money or commit fraud. The Treasury Department sets a 30-day window for banks and similar institutions to submit reports.

Suspicious activity reports can make it considerably more difficult for criminals to borrow, save, and access cash from legitimate institutions. No one doubts that the reports can do good things.

Unfortunately, many financial institutions felt that they needed to write reports about clients earning money from hemp. Hemp, after all, is a type of cannabis, which the federal government has not legalized.

Submitting suspicious activity reports assured that banks stayed on the right side of the law. In the financial industry, it makes sense to take an overly-cautious position so you never get fined by the government.

Not surprisingly, the most cautious institutions choose to deny clients earning money from hemp and CBD. This approach created a hardship for farmers, manufacturers, and retailers. Experts believe that the CBD market could reach $20 billion by 2024. Despite the industry’s great value and rapid growth, a lot of banks simply did not want to run the risk of accepting their business.

Congress’s Latest Move Makes Hemp Financing Easier

In November 2019, the Federal Reserve’s deputy general counsel told a group of banking leaders that the government would soon iron out issues that keep banks from working with the hemp industry.

Banks were already working on internal regulations for the industry. Without a clear sign from Congress, though, they couldn’t feel confident about their decisions.

The change in federal policy finally came in December 2019 when regulators stated that financial institutions shouldn’t consider hemp businesses “suspicious” anymore. Banks can still submit suspicious activity reports when they have evidence that a company is breaking the law, but they are not required to act as the “hemp police.”

The new policy essentially shifts responsibility from banks to growers and suppliers. Until recently, the government heavily relied on banks to report suspicious activity in an industry that financial institutions no little about. After the Farm Bill, banks found themselves in a precarious position. Now, the problem has been solved by recognizing that banks are not responsible for the activities of legal businesses.

Why Hemp Producers Need Banks

Anyone in the hemp industry will immediately realize the benefit of accessing legitimate financial institutions. The new friendliness between hemp and banking means that hemp producers will have easier access to:

  • Business loans that help companies grow in a competitive industry.
  • Low-interest lines of credit businesses can use for payroll and other expenses.
  • FDIC-insured accounts that protect money from theft.
  • Checking accounts that make businesses look more reliable when dealing with vendors.

Getting blocked from the financial industry has created a significant hardship for those in the hemp industry. Now, the federal government says it will take a more active role.

The Latest Approach to Hemp Regulation

For the most part, hemp growers understand that they can make a lot of money by following federal and state guidelines. A few farmers, however, have tried to grow high-THC cannabis under cover of industrial hemp.

The government will take a more active role in regulating the industry to make sure companies know that they will suffer repercussions for breaking federal cannabis laws. This change will likely mean that federal- and state-trained officials will spend more time visiting hemp farmers and testing their products. If the hemp has more than 0.03% THC, then companies will face consequences.

Unfortunately, the government doesn’t seem to have a policy that defines the consequences. A farm may get a warning for selling hemp with THC levels slightly higher than 0.03%. A farmer obviously growing cannabis intended for intoxication may face jail time as well as fines.

Much of the regulatory tests may happen without the knowledge of farmers and producers. Government agencies could purchase products from stores, test for THC levels, and determine whether the companies follow the law.

More Regulatory Clarifications to Come

Federal clarification makes it much easier for banks and hemp companies to do business together. Both industries will find that a relief that helps them grow and earn more money.

Still, hemp continues operating in a gray area because a small mistake could make products illegal. Hopefully, the government will continue refining its policies to help everyone involved make hemp products that benefit people and profits without unintentionally breaking the law.

December 23, 2019Comments Off
How Illinois Cities and Towns are Preparing for Cannabis Legalization

More states are legalizing cannabis both for medical and recreational use, a move that has gained increased acceptance among members of the general public. The reality of these law changes has some cities and towns scrambling to adjust. Many move to change their zoning laws and add city ordinances governing sales to deal with the new legislation. Others are bracing for the cultural changes they fear will follow. This situation is currently happening in Illinois, where recreational cannabis will become legal on January 1, 2020. When legal pot hits the Midwest, it has to say something about cultural attitudes.

Illinois Communities

Culturally, Illinois is divided into two basic parts: Chicago and Downstate. Chicago and its suburbs tend to be far more liberal than the downstate population, which is largely rural. So the legalization of cannabis has received mixed reviews in Illinois, although even some small conservative towns are eagerly anticipating the increased tax revenue generated by recreational cannabis sales.

Illinois is also bordered by some very conservative states such as Missouri. Although Missouri has technically legalized medical marijuana, many providers are reluctant to enroll patients in the program, partly because medical dispensaries are not opening until mid to late 2020. These circumstances mean that Missouri law enforcement is on high alert for Illinois cannabis sales that can easily cross the river. This type of legal quandary will undoubtedly play out in more states as cannabis is legalized in Mid-America and other more rural areas.

Zoning Laws

The state law allows individual cities and towns to decide if they will sell recreational marijuana. Chicago lawmakers have divided the city into seven zones and will allow 13 marijuana retailers in each. The mayor has introduced a zoning ordinance to ban recreational sales in the city’s famous Loop and Magnificent Mile area, however.

Some of the Chicago suburbs have decided to ban recreational sales. For instance, Arlington Heights will not allow recreational marijuana sales but Buffalo Grove will.

Small downstate towns like Quincy have approved recreational sales, largely to get much-needed tax revenue. Despite some last-minute zoning concerns, the city did vote to allow recreational cannabis sales in already zoned commercial areas with the stipulation they observe a 100-foot setback from daycare operations and schools. Several medical marijuana dispensaries have been designate dual sites by the state, meaning they can sell recreational marijuana as well as medical.

Local Ordinances

Illinois towns have hurriedly adopted new ordinances to deal with the recreational sales. Quincy’s recently adopted regulations include:

Illinois residents 21 and older can possess cannabis with a limit as follows:

  • 30 grams of cannabis flower
  • Up to 500 milligrams of THC contained in cannabis-infused product
  • 5 grams of cannabis concentrate

Non-residents 21 and older can possess cannabis as follows:

  • 15 grams of cannabis flower
  • 2.5 grams of cannabis concentrate
  • Up to 150 milligrams of THC contained in a cannabis-infused product

Since Quincy is a Mississippi river town, law enforcement is concerned that Missouri residents will buy their cannabis in Illinois and transport it over the bridge to Missouri where it is still illegal. Quincy police don’t plan to specifically try and stop this transport, but Missouri law enforcement may be tempted to closely monitor bridge traffic.

Tax Revenues

Illinois lawmakers are hoping for hundreds of millions in tax revenue due to the change in cannabis law, but officials from other states urge caution. Revenue estimates have often proven to be wrong, particularly in the early days of cannabis legalization.

Local tax revenue estimates are also uncertain. In the Quincy area, the county board is taxing the product at a max of 3.75. The city voted to tax the sales at the maximum of 3%. Although the town leaders don’t really know what kind of revenue to expect, they are hoping it will make a difference. Currently, the town is suffering from a revenue shortfall that has led to the recent adoption of an unpopular food and beverage tax.

Nationwide Concerns

What is currently happening in Illinois has already played out in other states, but the Midwestern dynamics are new. The only other Midwestern state that allows recreational cannabis sales is Michigan, and its law just went into effect December 1. Until now, recreational sales were legal in states that could be considered far more liberal than their Midwestern counterparts. These laws challenge what some residents still consider Midwestern values. While alcohol freely flows in the rural areas, cannabis has always been looked at with suspicion, even for medical use.

Clearly that attitude is changing since some Illinois small towns have voted to allow recreational sales. The state did not impose those sales on them. Now they are working to balance their concerns about pot with its business potential.

First Year Results

Legal cannabis has come to the heartland, and that may have long-ranging effects. These changes may influence other “fly-over states” to embrace recreational marijuana. The upcoming year will be quite informative. If things go well in Michigan and Illinois, can legalization in Missouri and Iowa be far behind?

Illinois has always been a odd blend of urban and rural concerns. In fact, downstaters often wish aloud that Chicago would spin off into its own state and leave the more conservative areas alone. But no downstate town had to allow recreational marijuana. Quincy voted to, and it’s not a progressive town in any way. That act alone indicates that the cannabis battle may be nearing its end. It’s not unreasonable to think it will be legal nationwide in just a few years, even if the federal government fails to act.

December 15, 2019Comments Off
Wildfires and PG&E Outages… a Nightmare for California Cannabis Companies

October holds significance for many California cannabis companies. The month is the peak of wildfire season, as well as main harvest time for cannabis plants grown outdoors. Past years’ wildfires ravaged marijuana farms, many of which never recovered or still are rebuilding. The decision by local utility company Pacific Gas and Electric (PG&E) to prevent fires by scheduling power outages for several days in October directly and indirectly impacted cannabis companies across the state.

Overview of the California Wildfires and PG&E Outages

Transmission lines operated by PG&E have been linked to wildfires that have decimated several California communities. PG&E’s power lines sparked 2018’s devastating Camp Fire, California’s deadliest fire on record. The wildfire not only killed 88 people and razed the entire town of Paradise, it destroyed more than 1.6 million acres, making Camp Fire the worst in terms of sheer scope as well. State fire officials also deemed the power company responsible for 12 of the fires that raged through California in October 2017.

In the past two years, at least 17,000 wildfires burned more than 5,000 square miles of California.

In October 2019, faced with red flag weather conditions of high winds, low humidity, and high temperatures, PG&E decided to implement what it termed “Public Safety Power Shutoffs.” The utility pulled the plug on electricity early in the month to 800,000 customers in 34 affected counties, impacting from 1.5 to 2.5 million people. At the end of the month, high-wind conditions led to outages to 973,000 customers. Businesses and homes were without electricity for up to several days.

Impact to Growers

Wildfires and power outages have wreaked havoc on many of California’s cannabis companies, which already were vulnerable thanks to the high costs of legalizing their businesses and limited availability of insurance coverage. Estimates of the impact made by the 2017 fires speculate 30 to 40 percent of the state’s marijuana growers were affected in some way, whether by the fires themselves or the smoke and toxic particles released in the air. The economic damages from the PG&E blackouts are not fully known. The so-called Emerald Triangle, the source of significant marijuana supplies, was particularly impacted by the blackouts, though; Humboldt County, for example, was the only county to completely lose power during the blackouts. 

Lost Crops

An obvious threat to cannabis comes from the direct destruction of crops lost to flames. In 2017, for example, in Sonoma County alone 30 pot farms and three pot manufacturers were destroyed. Though California’s wildfires have raged less in 2019, blazes still scorched more than 122,000 acres since the start of October. At least 58 fires have burned in 27 of the state’s 59 counties, leading to the evacuation of more than 200,000 residents during a declared state of emergency. Sonoma County, with 79 cultivator licenses, suffered the most damage, with a reported 77,758 acres burned in October. Also that month, the counties of Santa Barbara, Mendocino, and Monterey, with more than a thousand cultivator licenses among them, lost hundreds of acres each.

The loss of power to dozens of counties can have even broader ramifications. All sectors of the cannabis industry require electricity, including for lights in propagation, controlling the environments of indoor facilities, and operating HVAC and processing equipment. California’s cultivation industry uses 2.3 million megawatts of electricity annually. A power outage can destroy or damage crops at various stages of the cycle.

During October, the bulk of the outdoor crop is harvested and comes in from the field for the processing and drying stages. Cannabis farmers who harvested their crops before the first power shutoff on October 8 were more impacted. Electricity powers the circulation and exhaust fans, dehumidifiers, and HVAC necessary for ideal drying conditions. For those with freshly-cut plants in drying sheds, their crops were at risk of rotting. Fresh cannabis can develop mold after only two days of humid, static air. The quality of the harvest also can deteriorate, since cannabis’ aromatic terpenes and active cannabinoids, such as THC and CBD, begin degrading above 68 degrees.

Power outages can ruin crops grown indoors as well. Prolonged periods without indoor light stresses the plants, which can cause the plants to flower prematurely or to hermaphodite and pollinate.

Contaminated Soil and Plants

Cannabis plants may be spared the flames, but they still face potential contamination from wildfires. Airborne toxins like pesticides, ash, soot, insulation, building materials, and more can taint bud and would be either a danger to consumers or produce an inferior product:

  • Cannabis in the seed stage can be damaged by toxic ash introduced into the soil.
  • Plants in the vegetative state can be harmed if toxins impact their root systems.
  • Cannabis is in its reproductive, flowering cycle, is the most vulnerable for contamination, and smoke can coat the resinous flowers with dangerous toxins and foreign materials.
  • Bud impacted by smoke may suffer from stunted growth and cannabinoid levels.

Even if smoke-damaged plants pass toxin tests, their flavor likely will be affected and undesirable.

Impact to Manufacturers and Dispensaries

The PG&E power outages caused cannabis businesses to lose access to the California Department of Public Health’s inventory tracking system, CCTT-METRC. Foe some, operations could continue via paper as long as the database is updated within three days of regaining power. Regulations permit farmers to switch to hand-written transfer manifests, and retailers can sell with written receipts. Regulations are less clear as to whether transporters and distributors can transfer inventory during an emergency.

Less Products, Lost Productivity

Limits to cannabis crops, whether due to wildfires or power outages, affect the entire supply chain. Manufacturers have less and lower quality raw materials with which to make products. Dispensaries receive fewer products, and they lose business when consumers are dissatisfied.

Manufacturers like extract makers also suffer from power outages. The volatile chemicals they use to make cartridges and concentrates must be kept cool. Fresh-frozen cannabis products require constant minus 38-degree temperatures. Without electricity, melting results. The product can be damaged in less than 24 hours when water pools in the bags.

Future Impact

Recovery from disasters like wildfires and power outages challenges most cannabis companies, particularly due to industry-specific obstacles encountered because marijuana remains illegal at the federal level. Unlike traditional businesses, marijuana businesses and farms cannot qualify for access to FEMA relief funds or get adequate insurance to cover their losses. Most banking institutions will not fund loans to rebuild.

California’s woes extend beyond the cannabis industry as well as state borders. The state produces 58 percent of the cannabis cultivated in the United States. Losses affecting the multi-billion dollar industry are felt in other areas of the state and national economy as well.

Most California cannabis companies businesses will persevere. Those that are located in areas prone to electricity outages or wildfires are learning from the losses and better preparing their emergency responses.

November 12, 2019Comments Off
Mitigating Cannabis & Hemp Industry Risks With Insurance

Those involved in the hemp and cannabis industry need insurance just like everyone else. But this particular industry has special challenges and considerations.

Many insurance companies remain cautious about covering the hemp and cannabis industry because of marijuana’s classification as a Schedule 1 narcotic in the eyes of the federal government.

“Risk professionals representing cannabis businesses in the US, as well as landowners and landlords, can face a range of issues as a result of the disconnect between state and federal cannabis laws,” writes Krizzel Canlas for Corporate Risk and Insurance magazine.

The article goes on to recommend that those involved in the industry in any way need an insurance company intimately familiar with the laws and regulations and their differences at the state, local, and federal levels.

Ian Stewart of Wilson Elser, with more than 20 years of experience in complex litigation disciplines including cannabis, sees the potential for a wave of consumer class action lawsuits concerning the product itself, as well as liability to prescribing doctors.

Along with general liability and property insurance, those with businesses in the Cannabis and hemp industries need to think about:

  • Indoor Crop coverage
  • Finished Stock coverage
  • Stock While in Transit coverage
  • Commercial Auto coverage
  • Workers Compensation
  •  Directors & Officers insurance coverage

Conflicting state and federal laws, regulations concerning the treatment of cannabis and hemp products, and the reluctance of major carriers to get involved with the cannabis industry can present obstacles in finding the right insurance policy. Cannabis and hemp businesses are faced with purchasing substandard policies that may leave gaps in their coverage.

Skyfront Insurance Services can help to meet these needs. Founded by cannabis industry experts, Skyfront runs an agency “dedicated 100% to serving and protecting top tier compliant cannabis businesses.”

They understand the cannabis industry at Skyfront, and can cover you “whether you operate a direct plant-touching business or an ancillary services firm.”

Their products run from standard business insurance to the most specialized in the market, including:

  • General Liability
  • Product Withdrawal/Recall
  • Product Liability Insurance
  • Equipment Breakdown
  • Cannabis & Hemp Real Estate
  • Crop Loss
  • Workers’ Compensation
  • Distribution / Transportation / Cargo
  • Business Interruption
  • Property Coverage
  • Wrap Up Liability
  • Earthquake and Flood Coverage

What exactly do each of these cover and why do you need them?

General liability covers you from things like bodily injury, property damage, and personal injury that occur at your business.

Product Withdrawal/Recall insurance covers out-of-pocket expenses to insured distributors, retailers, vendors, customers or other third parties resulting directly from withdrawals or recalls of product.

Product Liability Insurance protects you against financial loss arising out of the legal liability incurred by an insured because of injury or damage resulting from the use of a covered product or out of the liability incurred by a contractor after a job is completed (completed operations cover).

Crop insurance is purchased by agricultural producers, including farmers, ranchers and others to protect against either the loss of their crops due to natural disasters or the loss of revenue due to declines in the prices of agricultural commodities.

Cargo Insurance covers loss and/or damage during the movement of cargo from one point to another. Shipment coverage can be by sea, air, or inland. Policies are tailored to suit individual shipper’s needs. Coverage can be provided for all risks or named perils basis.

Wrap-up insurance is a liability policy that serves as all-encompassing insurance that protects all contractors and subcontractors working on large projects costing over $10 million. The two types of wrap-up insurance are owner-controlled and contractor-controlled.

The remaining coverages meet the needs of businesses in general, but they all highlights the need for thought and risk assessment when choosing coverage for your cannabis or cannabis-related business.

Careful due diligence, legal advice from counsel familiar with this area of law, and proper insurance are always a wise choice in the cannabis and hemp industries.



September 26, 2019Comments Off
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.

See cannabis loan options on

August 21, 2019Comments Off
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. 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, 2019Comments Off
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