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Cannabis Business Loans | Things to Consider Before Applying for a Cannabis Business Loan

Apply for a cannabis business loan follows nearly the same process as applying for other types of business loans. Entrepreneurs interested in opening farms, manufacturing facilities, delivery services, and storefronts will likely encounter a few small differences. Overall, anyone who has applied for a business loan before will recognize the process when seeking money to open or grow a cannabis business.

Business leaders who have not applied for loans, however, might feel some anxiety as they borrow money from banks and private lenders. The following things to consider can help entrepreneurs prepare for the cannabis business loan process and, hopefully, secure funding for their ventures.

Lenders Can Consider Personal Credit Scores Before Approving Loan Applications

Lenders usually perform hard credit checks to determine whether they should risk lending money to business owners. Cannabis business owners can prepare for credit checks by requesting copies of their credit histories. Any person can get one free credit report per year from the major credit reporting agencies (Equifax, Experian, and TransUnion).

Correcting Errors on a Credit Report

Ideally, business owners should request their credit reports several months before they apply for loans. If any of the reports contain inaccurate data, it can take weeks or months to petition the credit reporting company for a correction.

To correct errors:

  • Send a dispute letter to the company that lists inaccurate information.
  • Wait for the credit reporting agency to conduct an investigation and write a report.
  • Send a dispute letter to the company or person that reported the inaccurate information.
  • Wait for the reporting company to contact the credit agency to fix the mistake.

About one in five people have errors in their credit reports, so every entrepreneur should scrutinize their reports before applying for loans.

Improving Credit Scores

A loan applicant’s credit score can affect whether the person receives a loan and how much interest the lender charges. People with higher credit scores tend to enjoy higher acceptance rates and lower interest rates.

Applicants without “Very Good” or “Excellent” scores, usually defined as 799 to 850, have better chances of securing low-interest loans.

Anyone with a score under 799 should try to improve the rating before applying for a business loan. Some of the fastest ways to increase credit scores include:

  • Making all payments on time (including credit card, car loan, student loan, and utility payments) to establish a trustworthy payment history.
  • Reducing the debt to credit ratio by repaying high-interest debt and keeping the accounts open.
  • Applying for a mixture of installment (car loan, mortgage, etc.) and revolving (typically credit card) accounts.

It takes time to improve credit scores. Ideally, business owners will give themselves several months or a year to repair their scores.

Lenders Will Want to See a Detailed Business Plan

Anyone who wants to borrow money to start or grow a business needs to prepare a detailed business plan that shows potential lenders how the enterprise will generate enough revenue to repay the loan. An effective business plan should include at least nine sections:

  • An executive summary that provides a brief overview of the business’s goals, market, growth potential, competition, and funding requirements.
  • Overview and objectives that go into detail about what the cannabis business will achieve.
  • Products and services that the cannabis business will offer that make it stand out from similar companies.
  • Market opportunities that describe an area’s need for the cannabis business and room for expanding into other areas.
  • Sales and marketing opportunities that will attract consumers or clients to the cannabis businesses.
  • A competitive analysis that describes the challenges and opportunities presented by other cannabis businesses in the area.
  • An operations plan that shows how the business will control expenses, fulfill consumer needs, hire experienced employees, and generate profits. This section should also include information about potential locations as well as the permits and licenses required to operate the cannabis business.
  • A description of the business’s management team and how each person will contribute to the venture’s success, including previous experience in the industry.
  • A detailed financial analysis that includes a balance sheet, income statement, cash flow statement, operating budget, and break-even analysis.

A well-made business plan can become the difference between getting approved or denied a loan. Business owners without much experience writing business plans should consider hiring consultants. Writing an accurate business plan means that owners need to reveal the positive and negative aspects of their companies. Even experienced entrepreneurs can struggle to remain objective while writing new business plans, so it makes sense to hire a consultant to at least assist in this portion of the funding search.

Understand Licensing and Permit Requirements

Licensing and permit requirements for cannabis businesses can vary significantly from state to state. Anyone who wants to start a farm or dispensary needs to understand the state’s requirements.

Many states and cities limit the number of permits that they will distribute. Limiting the number of permits helps prevent cannabis storefronts from crowding out other businesses. It also helps lower competition between dispensaries. A cannabis storefront will struggle to survive on a street that has a dozen other dispensaries within walking distance.

Entrepreneurs can learn more about licensing and permit requirements by visiting the cannabis portals of various states, including:

All states with medicinal and recreational cannabis have pages that can help business owners learn more about their licensing processes. Entrepreneurs should consult the state pages to become familiar with the process. They might also want to talk to lawyers or consultants in the cannabis licensing industry for additional help. Missing even one piece of information can delay an application significantly.

Prepare a List of Expenses the Cannabis Business Loan Will Cover

A detailed business plan should include all of the business’s anticipated expenses. Entrepreneurs applying for cannabis business loans should also make a separate list of expenses that they expect the loan to cover.

Some common expenses for cannabis dispensaries include:

  • Legal fees
  • Insurance
  • Commercial real estate rental
  • Property improvement
  • Marketing (signage, websites, online ads, etc.)
  • Security system with video cameras and metal detectors
  • Software
  • Furniture and displays
  • Office equipment (computers, copy machines, safes, etc.)
  • Security guards
  • Payroll
  • Taxes
  • Inventory and packaging

Common expenses for cannabis farms and grow operations include:

  • Farm equipment (tractors, wheelbarrows, etc.)
  • Land rental or purchase
  • Grow lights
  • Irrigation systems
  • Fertilizers
  • Employees
  • Security guards
  • Security systems with cameras
  • Fencing
  • Insurance

Even a small retail location or farm can cost $1 million or more to start. Detailed descriptions of how businesses plan to use borrowed money can make lenders more likely to accept applications, especially when the borrowers show that they already have considerable funds to pay for large expenses.

Provide Collateral, If Possible

Lenders want to mitigate risk as much as possible before accepting business loan applications. That fact applies to all businesses, not just those in the cannabis industry. The more collateral a person has, the more likely the lender is to accept the loan application. Having more collateral can also influence the interest rate that a lender charges the borrower.

Collateral can include any asset that the lender can convert to cash when the borrower fails to repay a loan. Lenders tend to favor assets that they can liquefy as quickly and easily as possible. Lenders consider cash the best type of collateral, although the business owner may need to put the cash in a secured bank account to ensure it doesn’t get spent before repaying the loan.

Other acceptable types of business loan collateral include:

  • Certificates of deposit (CDs)
  • Treasury debts
  • Corporate bonds
  • Real estate, such as homes or other business properties
  • Undeveloped land
  • Equipment
  • Inventory

Borrowers that plan to purchase land or buildings for their cannabis buildings might be able to use the new assets as collateral. In this situation, the lender would simply take the property when the borrower doesn’t repay the loan.

Cannabis business owners should expect their loans to have liens that make it possible for lenders to sue them for defaulting on loans. The lien can focus on a specific asset or group of assets. Blanket liens can include everything owned by the business.

Get Ready for a Long Process That Could End With a Rejection

Banks are cautious about lending money to new businesses. Most applications get rejected. Cannabis business owners often face additional scrutiny because they work in a “high-risk” industry. Federal laws make it even more difficult for banks to give loans to cannabis businesses. Since the federal government considers all forms of cannabis illegal, many lenders worry that they will get fined or prosecuted for working with companies in the industry.

Cannabis business owners should prepare to answer several rounds of difficult questions before they receive funding. Applicants should know as much about their businesses as possible. It often helps to bring a lawyer, business manager, or consultant to meetings with potential lenders. Failing to answer questions will worry potential lenders, which makes it unlikely for them to release funding to the business.

Business loan applications rarely get accepted quickly. It could take months of collecting documents, revising business plans, and talking to loan reps. Even after months of preparation, the lender could back out at the last moment. Every entrepreneur should expect rejections before finding the right lender for their business.

It’s a long, difficult process. But it’s often the only way to pay the upfront expenses needed to start a cannabis business.

Compare as Many Offers as Possible for Better Terms and Lower Interest Rate

Securing a cannabis business loan takes a lot of time and effort. Business owners shouldn’t take the first offers they receive, though. After weeks or months of searching, any offer may look tempting. It almost always pays to get more offers and compare them.

Interest rates for business loans typically fall between 2.58% and 7.16%. Some lenders charge up to 20% for borrowers in the cannabis industry. Loans typically get repaid within 18 months.

Even a few percentage points can make a big difference in the amount of money borrowers spend repaying their loans.

A business that borrows $1 million with an 18-month term loan and a 5% interest rate will spend about $40,050 in interest. This scenario assumes that the borrower doesn’t pay any origination, documentation, or other fees.

The same loan with a 7% interest rate will cost the borrower about $56,330 in interest. Just two percentage points can save a borrower more than $16,000 over 18 months.

Lenders that charge 20% on 18-month interest rates create a serious burden for cannabis businesses. The interest for that loan comes to about $165,738. That’s more than $13,800 per month in addition to the $1 million that gets repaid over 18 months. Few new businesses earn enough revenue to pay such high rates.

By shopping around for better rates, cannabis entrepreneurs improve their chances of success by lowering the amount of money they spend repaying their loans each month.

Conclusion

The cannabis industry has grown quickly in recent years as more states legalize the plant and its concentrates for medical and recreational uses. Cultivators and dispensaries have opportunities to generate significant wealth, but starting companies requires funding that few people have on hand.

Business lenders can help fill the gap between the cash that business owners have on hand and the amount of money they need to start new cannabis businesses. Anyone interested in beginning a cannabis business should explore their options, find the best possible loans, and use the money to pay for locations, equipment, and inventory that will contribute to success.

March 27, 2021Comments Off
Mexico’s Journey to Legalized Cannabis

The road to Mexico’s cannabis legalization has taken several strange twists. In some ways, the country has strict laws regarding drug production and possession. In other ways, it has led efforts to decriminalize personal possession so law enforcement could focus on large-scale traffickers.

In March 2021, Mexico took a significant step towards nationwide legalization of recreational marijuana for adults. The Chamber of Deputies, a legislative branch similar to the U.S. House of Representatives, voted 316 to 129 in favor of legalization. The law will not go into effect until the Senate votes and President Andrés Manuel López Obrador signs the approved bill. Most experts believe that the final steps towards full legalization are mere practicalities since Mexico’s president has expressed support for the legislation.

A Brief History of Cannabis Prohibition in Mexico

Mexico passed a law prohibiting the possession of cannabis nearly two decades before the U.S. federal government passed restrictions. In 1920, Mexico passed a law making cannabis possession, production and sale illegal. Some local bans had been in effect since 1882. Mexico’s federal government added penalties to production and sale in 1927 when it made exporting cannabis an offense.

These laws started to change in 2009, but it was a 2015 Supreme Court ruling that put the country on a clear path to legalization. However, it would take time for the changes to influence cannabis use and criminal behavior.

Cannabis Cultivation and Exports

As is often the case with prohibition, Mexico’s earlier laws created a lucrative black market and turned casual cannabis users into criminals. Cannabis cultivation continued in Mexico, and a significant percentage of it flowed across the northern border into the U.S.

The amount of cannabis crossing the border has dropped over the last decade, though, likely because Mexico and many U.S. state governments have loosened restrictions on the plant.

The U.S. Border Patrol reports having seized about 1.54 million pounds of marijuana in 2015. In 2017, the U.S. Border Patrol reported that it seized about 861,000 pounds of cannabis, nearly a 50% reduction.

Important Moves Toward Cannabis Legalization in Mexico

The drop in cannabis exports from Mexico to the U.S. line up with changes to Mexico’s drug laws and enforcement.

Cannabis Decriminalization in 2009

Mexico’s legislators made a small—but critical—step toward sensible cannabis laws in 2009 when they decriminalized small amounts for personal use. The government believed that it was wasting resources by targeting personal users. It wanted to redirect those resources to large-scale dealers and exporters, many of whom were committing violent crimes across the country.

The new law gave people the choice of paying a fine, spending some time in jail or attending a drug rehabilitation program. Unfortunately, the law described an absurdly small amount as the “personal use” limit. Anyone with over 5 grams of cannabis was subject to criminal liability for drug possession. So people could only own slightly more than an eighth of an ounce. Purchasing a quarter, half-ounce or ounce could lead to time in prison even though most people would consider those amounts suitable for personal use.

Supreme Court’s 2015 Decision

In 2015, Mexico’s Supreme Court voted 4 to 1 that the government committed a human rights violation by preventing people from growing cannabis for personal use. According to the court, the laws violated an individual’s right to develop their personality. Interestingly, surveys showed that only 20% of Mexico’s residents supported legalization and 77% opposed it.

Ideally, the Supreme Court’s decision would have immediately given every individual the right to cultivate and use cannabis. But It would take several years before the federal government made the proper moves to change its laws.

In 2017, both chambers of Mexico’s legislative body easily passed a law that would allow people to use medical cannabis for certain ailments. The law, however, more accurately resembles the U.S. Farm Bill than a push to legalize marijuana. According to Mexico’s law, medical cannabis could not contain more than 1% THC.

For comparison, many modern strains of cannabis contain 20% or more THC. Anyone looking for a high from Mexican medical cannabis would need to use a large amount of the product.

Supreme Court’s 2018 Decision

By 2018, the Supreme Court had ruled five times that the government could not enforce recreational cannabis prohibition. The justices seemed to have reached their limit with frivolous lawsuits. They decided that the current federal laws could remain in place, but the government should not enforce them. The court told the federal government it had 90 days to legalize cannabis for adults.

Not surprisingly, the federal government could not reach this goal. To be fair, 90 days is an incredibly short amount of time to change laws, develop regulations and determine how legal distribution would take place. The court understood the challenging nature of its demand and extended the deadline to December 15, 2020.

The Mexican Congress missed the deadline, but it made promising moves toward legalization and sensible regulation. The Supreme Court continued extending the deadline, perhaps because the government was making a good faith effort.

Now that the Chamber of Deputies has passed a recreational marijuana bill, it’s only a matter of weeks or months before the bill becomes a law. No one expects that the law will give Mexican residents instant access to legal cannabis. It will take time to establish licensing procedures and decide on other details. People will not be able to walk into a cannabis dispensary to purchase products, but they will not need to worry about possessing cannabis.

Mexico’s evolution toward recreational cannabis legalization could significantly pressure the United States to make similar changes at the federal level. Currently, the U.S. federal government considers cannabis a Schedule I drug, meaning it does not have any medical applications and has a high potential for abuse. Of course, more than half of U.S. states recognize the medical properties of cannabis, creating a legal gray area that makes some businesses and investors nervous.

The fact remains that the United States will soon become the only large country in North America that prohibits cannabis possession. Canada ended federal cannabis prohibition in 2018. The U.S. will sit between two major countries that do not prohibit cannabis as long as sellers follow industry regulations and users enjoy products in private.

Legalization Means Ample Business Opportunities for North America

It seems unlikely—or at least unwise—for the United States to remain the only large country in North America to prohibit cannabis, especially considering the tremendous growth of legalization at the state level.

Canada, Mexico and the U.S. could work together to become a leading supplier of cannabis throughout the world by getting ahead of other countries’ laws. Currently, more governments have learned that they must at least tolerate the personal use of cannabis. Charging everyone who carries a few grams has become expensive and pointless, especially considering that easy access to legal marijuana shows a significant correlation with decreased opiate use and overdoses.

If the United States does not choose to legalize cannabis, it will miss one of the biggest trade opportunities of the century. As more countries in Europe legalize marijuana, North America could supply strains backed by celebrities and established brands. Canada and Mexico are already posed to reap the benefits. Does the U.S. really want to lose millions or billions in exports?

Mexico Proves That North America Will Evolve

Mexico prohibited cannabis long before the United States, and most of its population doesn’t support legalization. Despite these challenges, Mexico managed to make sensible changes to its drug laws. Depending on the next steps it takes, the government could use legal cannabis as an important source of tax revenue to fund infrastructure and economic development projects. (Canada collected $186 million in taxes within five and a half months of legalization.)

In the United States, about 67% of residents support legalization. Only 32% support prohibition, and that percentage is dropping fast. Between 2009 and 2019, the percentage of people supporting prohibition fell by about 20%.

Given these facts, it seems implausible that the U.S. could not follow Mexico’s lead.

March 23, 2021Comments Off
Choosing the Best Location for Your Cannabis Retail Store

Experts expect cannabis sales to continue growing rapidly over the next few years as more states legalize products containing THC for medicinal and recreational purposes. In 2018, legal cannabis revenues fell somewhere between $8.6 billion and $10 billion. Projections show sales will fall between $25 billion and $30.4 billion in 2023.

The cannabis industry’s growth does not guarantee success for business owners. Cannabis retail stores must pay hefty taxes that cut into their profits. (It doesn’t help that cannabis companies must pay federal taxes even though they cannot access low-interest small business loans supported by the Small Business Loan Association.) The industry has also attracted competitive entrepreneurs determined to create brands that will dominate the market.

Business owners can help ensure success by choosing the best locations for their cannabis retail stores. Finding the perfect place takes a lot of research and insight, but it can pay off in the form of higher revenues, more customers and lower fees.

Research Zoning Laws for Permissible Use

Just because a state has legalized cannabis doesn’t mean that business owners can open retail stores anywhere they want.

California offers an excellent example of the limitations that counties and neighborhoods can put on cannabis retail stores. Cannabis laws in Los Angeles County say that companies can open businesses for cultivation, manufacturing and retail. Ventura and Orange Counties, however, ban all of these activities.

Business owners can start narrowing their location options by eliminating properties in countries and communities that ban cannabis sales. A corner retail store in Orange County might look like the perfect place for a thriving dispensary. Unfortunately, county law prevents anyone from selling any cannabis products for recreational purposes.

Are Cannabis Licenses Available?

Many areas have a limited number of cannabis licenses that they will allow at one time. This approach helps existing cannabis stores thrive while making it impossible for streets to turn into “pot zones” that may discourage other businesses.

Potential business owners need to find out how many licenses are available in an area. Without an available license, no one can open a cannabis store in the community.

Estimate Foot Traffic That Will Bring in More Customers

Foot traffic can play a critical role in the success of any retail store. When a street or shopping center gets a lot of foot traffic, stores can expect people to come in out of curiosity or convenience. A person might not have even thought about purchasing a cannabis product today. When they walk by an attractive store, though, they think about how they don’t have any edibles at home. They don’t plan to enjoy them until the weekend, but this seems like a convenient time to buy.

Several tools can help business owners estimate foot traffic before they lease or purchase storefront properties. Useful tools include:

Owners should pay attention to more than the number of people walking by the storefront. Demographics matter, too. How many people are likely to enter the store, explore merchandise and spend money on products? Knowing more about the store’s target demographic can help business owners estimate the true value of foot traffic.

Estimate Vehicular Traffic

The amount of vehicular traffic can also play an essential role in how many people visit a cannabis retail store. Ideally, entrepreneurs should look for locations on busy—but not overly congested—streets. Frequent traffic jams could prevent people from driving to the store. A location on a busy street, however, will get more attention from drivers.

What counts as “congested” in one city may not seem problematic elsewhere. For example, drivers in Los Angeles might tolerate heavy traffic better than those in Portland, OR. The attitude of nearby residents should play a role in the decision.

Consider Whether the Store Has a Good Place for Advertising

Storefronts located on busy streets need ways to stand out from other businesses. A cannabis retail store in the middle of a shopping center might not get noticed by many drivers. On-site advertising could solve that problem, but it costs money.

Before acquiring storefronts on popular streets, business owners need to consider:

  • Local regulations that will influence on-site advertising, such as limiting the height of a sign.
  • Whether commuters can see the store from the street.
  • How much it would cost to install a small billboard that attracts attention from the road.
  • The regulations and costs of promoting the store with neon signs and similar on-site advertisements.

Depending on advertising options and costs, it may not make sense to choose cannabis retail store locations that seem like excellent opportunities at first.

Look for a Cannabis Retail Store With Ample Parking

The average American drives nearly 13,500 miles per year. The number of miles driven varies significantly by state. Regardless, it’s obvious that most Americans prefer to drive than walk. Given this preference, it makes sense for cannabis retail store owners to find locations with ample parking.

Population density will play a role in how much parking a store needs. A city with a lot of residential buildings near downtown might not need much parking. A store in the suburbs, however, will need a parking spot for every customer. When shoppers discover that they cannot find easy parking, they might decide to frequent another cannabis store. As long as they can purchase the products they want, they don’t care where they shop.

For drivers, it’s more convenient to choose a storefront connected to a large parking lot. Many of them do not want to pay for street parking or parking garages. Depending on the area, a filled parking lot could mean a long walk between parking a car and visiting the store.

Think About Security the Cannabis Retail Store Will Need

Cannabis retail stores need to take security seriously. Criminals would love to target cannabis stores that have millions of dollars in products and plenty of cash on hand. An excellent security system that prevents people from entering or leaving the retail area without permission certainly helps. Avoiding the possibility of successful burglaries, though, makes the store even more secure.

Business owners should look at the amount of criminal activity in an area before spending money on retail space. A low-crime area will not bring in as many thieves. Plus, customers will feel more comfortable coming to and leaving the store with cannabis products.

A secure storefront should also have physical barriers that make theft more difficult. Ideally, the store shouldn’t share doors with other businesses. It should have as few entrances and exits as possible (including windows). All windows and doors should be made of a heavy material that criminals cannot smash or cut.

Conclusion

Businesses can make a lot of money by entering the cannabis industry. Finding the best location for a cannabis retail store is one of the steps people should make when developing their business plans.

Use 420Property.com to find cannabis retail businesses for sale, cannabis retail locations for sale, and cannabis retail locations for lease.

February 24, 2021Comments Off
Overcoming Real Estate Roadblocks in the Cannabis Industry

The number of marijuana dispensaries in the United States is expected to grow this year as more states legalize weed, the federal government considers legalizing the substance nationally, and marijuana becomes more mainstream overall and sees growth through the pandemic. 

One of the biggest challenges that dispensary owners face is finding a location.

Even though it’s 2021 and recreational marijuana is legal in 15 states plus the District of Columbia, and medical marijuana is legal in another 33 states plus the District of Columbia, there are still a lot of landlords who want to work with cannabis companies.

In this post, we will go over the most common and frequently encountered roadblocks in the cannabis industry and how to overcome them.

Roadblock #1: Zoning 

Zoning requirements vary by market. Commonly, dispensaries must be a certain distance from public services like schools, churches, and parks. This, of course, further narrows the options for retailers. 

The good news is that large players are coming up with a solution to this challenge by dedicating real estate departments that focus on vetting locations and navigating regulations. We are also seeing a lot of commercial real estate practices, and portals specialized in marijuana businesses pop up across the country. These operations are often small and specialize solely in navigating the country’s budding marijuana business opportunities. 

A large part of their specialization is knowing what clauses to include in marijuana store leases that are not commonly included in other retailer leases.

Roadblock #2: Getting the License to Sell Marijuana in Tandem with Lining Up the Real Estate 

The timing of licensing is another roadblock that many marijuana dispensaries face. Some states, like California, require retailers to first have control over a particular site, whether through a lease or an option to lease before they can even apply for a license. Most states also have a limited number of marijuana sales licenses. This means that when one becomes available, there may be a flood of prospective retailers applying.

All during the commonly months-long licensing process, would-be retailers are building out their spaces and paying rent for it before they can even sell a single bud. Of course, this isn’t cheap and can cost upwards of hundreds of thousands of dollars. Then, if the license doesn’t end up getting approved, that money is just a loss. This problem is especially prevalent in highly populated areas where most mixed-use buildings aren’t owned free and clear, meaning a lender behind a building still has the final say on any deals for dispensaries and other businesses. 

Roadblock #3: Reluctant Landlords

Some landlords are still under the notion that marijuana businesses will attract illegal activity and increased hassling by law enforcement.

Even in a state like Oregon, where recreational marijuana is legal and the state’s legislature passed House Bill 3460 to authorize and regulate dispensaries, some landlords don’t even know the laws exist.

One great way to overcome this roadblock is to arm your potential landlord with the power of knowledge! Come to your initial meeting with them ready to answer any questions and concerns they may have. Bring some paperwork with you about laws in your state regarding the sale of marijuana and distribution regulation. Ensure them that your operation is completely legal and you are a functional, reputable, and legitimate business.

Some more tips to winning over hesitant landlords include:

  • Bring your professionalism: As we said, you need your landlord to understand that your business is just as viable and you are just as professional as their tenant down the street who sells watches. Do this by presenting him with your sales figures, showing up to showings and meetings on time, returning their phone calls as soon as you can, and be polite and courteous. Unfortunately, some people have preconceived notions that canna-businesses are run by criminals or shady people; it’s up to you to dispel that myth.
  • Preparation: As we mentioned, you must be prepared for whatever the landlord is going to ask you. Some landlords may worry about the kind of clientele your cannabusiness will bring to their neighborhood. Did you know that studies show that dispensaries actually reduce crime in the neighbors they are located in? Bring a copy of this information to ease the landlord’s concerns and debunk any preconceived notions in their head.

Finding that perfect location for your cannabusiness is most definitely a bit of a challenge and will likely be a long process. Search for cannabis retail locations for lease on 420property.com!

February 19, 2021Comments Off
Cannabis Industry Loans & Financing – Possibilities Looming After Legalization?


Since the 1990s, when states started passing laws that made medical cannabis legal within their jurisdictions, businesses in the industry have faced difficulty funding their ventures. A handful of traditional lenders have loosened their restrictions, but it’s still incredibly hard for anyone in the cannabis industry to get a loan or other type of financing without going to private sources.

That may change soon as a Democrat-led Congress and White House consider changing laws that make traditional lenders wary of cannabis. In the meantime, private lenders outside of the traditional banking system offer the best option for people who want to start or expand their cannabis businesses.

Federal Cannabis Prohibition Makes Funders Worry About Legal Consequences

Over half of the states in the U.S. now have laws that legalize medical or recreational cannabis. Most states that have legalized cannabis have reputations as liberal places. That caricature looks accurate when focusing on states that allow recreational cannabis sales, although Alaska is an obvious outlier.

Banks Feel Pressure to Turn Away Cannabis Businesses

Many states passed recreational and medical cannabis laws based on the promise of collecting additional tax revenue that they could use to pay for education, drug rehabilitation, and other critical programs. Outrageously, many of the cannabis companies responsible for raising those funds cannot even use banks. A state like California might say that dispensaries and farms operate legally, but the federal government still follows laws that categorize tax-raising entrepreneurs as criminals.

The conflict between state and federal laws have created a lot of concern in the banking industry. Since the federal government regulates banks, many of them choose to avoid all cannabis activities. Knowingly opening accounts for cannabis businesses could lead to charges of money laundering from the federal government. Even under the Obama administration, which said it would largely ignore cannabis activity in legal states, banks worried about the repercussions of dealing with businesses operating on the legal fringe.

Funding Becomes Impossible in a Conflicted Legal System

Banks concerned about being labeled as money launderers have similar concerns when cannabis companies apply to borrow money. Accepting the loan application could make the bank look like an accessory to large-scale drug manufacturing and distribution.

To make matters worse, the federal government could target the person responsible for accepting the loan application. That person could face prison time and professional consequences.

It’s unlikely that banks worry about such consequences with Biden in the White House. He will most likely take a position similar to Obama’s. But banks know that political positions matter much less than laws. While the Obama administration may not have focused on above-board cannabis businesses, the Trump administration took a different perspective. Paranoia about how quickly political influence can shift became apparent when former-president Trump made Jeff Sessions the U.S Attorney General. Few politicians have a more rabidly anti-marijuana perspective than Sessions. With Sessions in charge, anything could happen to the rapidly growing cannabis industry.

Banks take the same view when they consider extending loans and other types of funding during the Biden administration. They know that the current president will only hold his position for a few years. After that, the federal government’s priorities could change overnight.

Only Congress can pass laws that make banks feel safe lending money to cannabis businesses. Until that happens, banks will not take any risks in the industry.

Private Funding Offers an Alternative to Bank Loans

Private funders have fewer concerns than do banks and credit unions. Organizations within the traditional banking system have a lot to lose by stepping out of line. Even losing FDIC accreditation could force a large bank with multiple locations to close. An ongoing investigation into illegal activities would also force branches to close while the federal government snooped through their documents and interviewed employees.

Private funders don’t need to worry as much about the federal government. As long as they work with cannabis businesses that follow state laws, they shouldn’t run into legal issues by funding dispensaries, farms, and labs that make concentrates, edibles, and similar products.

Do Cannabis Businesses Really Need Outside Funding?

Cannabis businesses need outside funding just as much as do businesses operating in other industries. While a cannabis business might quickly recoup the money it borrows, it still needs to pay for upfront costs months or years before it earns its first dollar.

Even growing cannabis sold as smokeable flowers takes months of work. Farmers can expect to spend:

  • About one week waiting for seeds to germinate.
  • Three to eight weeks for the plants to grow stems and leaves.
  • Five to sixteen weeks for the plant to grow flowers.
  • About four weeks to harvest, dry, and cure the flowers.

A cautious cultivator will not plan to earn money on a crop for at least seven months. During that time, the farm’s expenses include paying for labor, electricity, water, soil, nutritional supplements, lighting, and pest repellants.

Of course, the cultivators also need to pay for the buildings or land where they plan to grow cannabis. Browsing the property listings advertised on 420property.com, potential buyers can see that land for sale can easily exceed $10,000 per acre. Farms become much more expensive when they include buildings for processing cannabis and storing equipment. The smallest hydrocarbon extraction closed-loop system from the popular equipment manufacturer Iron Fist Extractors costs thousands of dollars. That doesn’t include the price of plant material and solvents.

Entrepreneurs that want to purchase active dispensaries can expect to spend millions of dollars. Even a small dispensary in California can cost at least $4 million. Delivery businesses often cost $250,000 or more. Unless the buyer has millions of dollars on hand, the person will need to find funding to help pay for the purchase.

Equipment for making cannabis and hemp concentrates also costs a lot of money. Growing interest from consumers makes purchasing extraction equipment worth the investment. Still, business owners can’t enter the market until they can buy reliable equipment that does the job well.

Congress May Change Laws, But It Hasn’t Happened Yet

Congress could pass cannabis laws that make banks feel comfortable working with the industry. Even a law that decriminalizes cannabis would make it easier for banks to fund cannabis businesses without concern.

Some members of the 2021 Congress have already issued statements promising to pass laws that will help banks support legal cannabis businesses. Promises from a few liberal members of Congress from states that have already legalized recreational cannabis, however, might not mean much. Until Congress passes a comprehensive law that either decriminalizes cannabis at the federal level or gives banks permission to work with cannabis in legal states, the banking system will shy away from opportunities.

Frankly, banks should shy away. Promises have been made many times before. Still, the country has a confusing system of cannabis laws.

Private Cannabis Credit Issuers and Lenders Fuel Industry Growth

Many private cannabis credit issuers and lenders have competitive rates and products that match those from traditional banks. The biggest difference is that private lenders are willing to work with businesses in the cannabis and hemp industries. Some of of the private financing options available in the cannabis industry include:

  • Lines of credit for cannabis and hemp businesses.
  • Equipment financing and leasing.
  • Working capital loans.
  • Short-term working capital loans.
  • Asset-based and collateralized loans.

Find cannabis industry financing on 420Property.com!

February 19, 2021Comments Off
Real Estate Sale-Leaseback Deals on the Rise in Cannabis Industry

The sale-leaseback is a unique financing option that a lot of cannabusinesses are turning to. The transaction is neither debt nor equity financing; think of it more like a hybrid debt product.

With the sale-leaseback, a company doesn’t increase its debt; instead, it gains access to needed capital through the sale of certain assets and then leases those assets back to continue operations. For cannabusinesses, this can be in the form of selling any cultivation, processing, and storage real estate in order to obtain much-needed operating capital and then lease it back. This kind of transaction is perfect for cannabis companies because think of all the land and businesses cannabis operators use—from land, warehouses, farming machinery and retail space, these are all assets with great financial value.

What Is a Sale-Leaseback?

Cannabis operators have restricted financing options, which leads many to struggle with liquidity issues. In a sale-and-leaseback, commonly known as just a sale-leaseback or even just a leaseback, a cannabis operator sells their property (greenhouse, warehouse, dispensary, etc.) to a REIT and then leases it back. This allows an operator the chance to get some fast cash without reducing their ownership interests. 

In essence, the sale-leaseback allows the cannabis operator to take the money they make to invest and help grow their business instead of having their equity tied up in real estate. This allows them to yield a higher return than owning real estate.

Sale-leasebacks are extremely common in other non-cannabis real estate sectors, like office buildings, apartment complexes, shopping centers, warehouses and hospitals.

But, given that cannabusiness is a relatively new industry and the fact that cannabis is still illegal at the federal level, there are a limited number of cannabis REITs that operators can work with.

How Does a Sale-Leaseback Transaction Work?

A leaseback transaction for real estate comprises two agreements:

  1. The property’s current owner-occupant agrees to sell their asset to the investor for a set price.
  2. The new owner agrees to lease the property back to the existing tenant under a long-term leaseback agreement and therefore becomes the landlord.

The transaction allows a seller to remain the tenant while transferring ownership of an asset to an investor. On the other hand, the purchaser is purchasing a property with a long-term tenant already in place, which allows them to generate cash flow immediately.

In a sale-leaseback, the seller-tenant no longer has an ownership interest as they essentially forfeit the right to receive any appreciation on the value of the property. If they stop being able to make the monthly payments, they will have to renegotiate the lease, or they may be evicted.

Why Cannabis Companies Are Turning to Sale-Leasebacks

Whether for working capital or expansion projects, or anything else, sale-leaseback transactions are intended to give companies a much-needed financial boost by selling an asset with substantial value. The best part is, as long as they’re willing to lease it back from the new buyer, they don’t have to give up that asset. Here are some benefits that are causing cannabusinesses to turn to sale-leaseback transactions: 

  • Sale-leaseback is an increasingly viable financing option for cannabis businesses as access to funding from venture capitalists, family offices, and wealthy investors is limited in the space. What’s more, traditional financing from banks is completely out of the question because cannabis is categorized as a Schedule 1 drug.
  • Sale-leaseback transactions are an ideal way to raise cash while retaining access to key properties.
  • Since there is still a lot of ambiguity around the legalization of marijuana federally, it’s very hard for cannabusinesses to get loans.
  • A sale-leaseback is a long-term lease agreement that locks in expenses.
  • There are tax benefits associated with sale-leasebacks. As cannabis operators become lessors, they can deduct all or a portion of their lease payments. 
  • Selling real estate and leasing it back frees up sanded capital, which allows the company an opportunity for growth capital and the chance to reinvest in their core operations. The proceeds from a sale-leaseback transaction can be used to invest in different aspects of the cannabusiness operations, such as equipment and inventory purchases, expansion, and new hire training.  

 Here are some examples of recent sale-leasebacks in the cannabis space:

  • Chicago-based Cresco Labs made a $50 million sale-leaseback deal with GreenAcreage Real Estate, a REIT in New York providing sale-leaseback and construction financing to companies operating in the cannabis industry.
  • New York-based multi-state operator (MSO) Columbia Care raised $35 million by selling and leasing back six properties in Illinois, California, and Massachusetts. The properties were purchased by New Lake Capital Partners out of Maryland.
  • Green Thumb Industries, an MSO based in Chicago, made a $39.6 million sale-leaseback deal for a cultivation facility in Pennsylvania with San Diego-based Innovative Industrial Properties.
  • New York-based MSO, Acreage Holdings, signed a $72 million sale-leaseback deal for properties in Florida, Massachusetts, and Pennsylvania with the buyer GreenAcreage.

In the short term, we expect marijuana companies to continue to use sale-leaseback transactions at an increasingly large rate. That’s because it’s become harder for marijuana companies to raise funding in the past couple of months thanks to falling stock prices of cannabis companies that aren’t turning a profit. This will lead sale-leaseback deals to become even more popular. However, in the long-term, as marijuana becomes more and more accepted, it’s likely that traditional funding sources will get on board with helping cannabusineses. This leaves the future of sale-leaseback transactions unknown.

February 19, 2021Comments Off
What Should You Look for in A Cannabis Insurance Agency?

The cannabis industry is a rapidly growing industry with very high stakes due to the fact that the potential for profit is high but the accompanying risk is also high. This stems from the nature of the product itself and the propensity for consumer claims to pile up just like they do with other consumable products. In the past few years, a lot of injury and product liability lawsuits have been filed against cannabis companies for a number of reasons, including the use of pesticides. Some of these cases were dismissed but others are still awaiting settlements and rulings and it does not look like this will end any time soon. With the growth in the industry, it is only rational that there is a possibility of an increase in the number of legal suits that will be brought against cannabis companies. It is therefore important that business owners take the needed steps to guarantee that they are sufficiently covered by their insurance policy. In addition to the fact that a good insurance cover would protect your business from the impact of risks, some states also demand that cultivators have an insurance cover.

Unlike regular insurance covers where you can just do a google search and you will be presented with a lot of options to choose from, purchasing a cannabis insurance is not that simple. This is due to the fact that there are a lot of restrictions and risks associated with the industry and only very few insurance companies have the capacity to handle the requirements. It is therefore crucial that business owners do their research in order to select the best insurance provider for their company. In this rapidly expanding but somewhat unstable industry, here are some of the things you should look for when selecting a cannabis insurance agency.

Experience

The legal waters of the cannabis industry require experience and knowledge of the industry in order to navigate it successfully; the insurance aspect is more or less the same thing. When choosing a provider, make sure they are very familiar with the workings of the system so as to ensure you get the best coverage possible. Working with an insurance agent who has no idea of how the cannabis industry works, the many intricacies, requirements and regulations, will leave you at risk of having the wrong coverage or one that does not sufficiently cover your business.

Experts are of the opinion that purchasing a cover from an industry that has dealings with the cannabis industry is the best option. This will ensure that you end up with a provider that understands your business, your peculiar business needs, the coverage types, the regulations of each state and the overall industry.

Specialization

When looking for an agency to provide your cannabis insurance cover, it is important that you go with a provider who specializes in the cannabis industry. This is not personal insurance where any insurance company who has their hands in many pies can offer you a cover that fits, it is the cannabis and it is easily one of the most complex and rapidly changing industries in America today. Therefore, do your research and find a provider who has proved themselves as specialists in the industry. Also, find out the states they have been practicing in so you will know if they are versed in the requirements of your own state. The extra knowledge and skill that comes with years of practice and specialization will be of added value to your business. This will ensure that you get the best advice possible and you can rest assured that your coverage will be comprehensive enough and you are completely protected from risks.

Extent of coverage

There is a simple rule that you can adopt when searching for the right cover for you and it goes something like this “if it isn’t all-inclusive and comprehensive, it isn’t for you.” The fact that there are several risks that your business will face cannot be overemphasized. Therefore, you should make sure that your insurance provider can offer you a robust cover that takes every part of your business into consideration. There are some packages that you should consider having in your insurance cover and these include:

  • General liability which covers any risks posed by the company itself or the employees. It also covers lawsuits brought against your business by third parties.
  • Cannabis product liability which provides protection in the case where a consumer uses your product and then claims to have adverse reactions due to your product.
  • Cannabis property coverage which provides protection in cases of damage to your business buildings or their contents due to theft or fire. This cover may also be expanded to include any extra expenses or loss of income that may arise due to the property damage.
  • Workers’ compensation
  • Cannabis crop insurance
  • Professional liability and
  • Excess liability

Your business has unique insurance needs and you will get the best deal with an insurance agent who understands your business and is willing to provide a fitting coverage for you.

Consistency

Having established that the cannabis industry is very unstable, it goes without saying that it is wise to have an insurance agency that will be there when you need them. Do some research on the history of the insurance partner you want to choose, make sure they are strong, have been around for a while and have a good history. This will ensure that you are going with a company that will likely be around for as long as you need them.

Dependability

Whatever company you decide to go with, it is important that you can trust them. So, find a company that inspires trust in you by their actions, response to inquiries, operational procedures and even their values. Ensure you ask all your probing questions and also look for recommendations from other people who they work with. This is a great way to begin establishing trust.

This is a very important aspect of your business, so take all the time you need, do your research and get answers to all the questions you have. Ensure you make the best decision for your company and you will be glad you did.

January 31, 2021Comments Off
Appraising Cannabis And Hemp Real Estate, Businesses, and Assets

Whether people want to purchase or sell an existing cannabis or hemp business, property, or asset, it makes sense to get an appraisal from someone who has ample experience in the industry.

Organizations That Provide Appraisal Services For Cannabis And Hemp Businesses

A few organizations already have experience appraising real estate, businesses, and assets within the cannabis and hemp industries. Even within these organizations, business owners and entrepreneurs have several things to consider.

Uniform Standards Of Professional Appraisal Practice (USPAP)

Managers, owners, and entrepreneurs in the cannabis and hemp sectors should not automatically assume that USPAP can help them. The organization focuses on appraisals for businesses that:

  • The business must follow all laws, such as keeping products within legal states instead of shipping them to states that do not allow cannabis products.
  • The business must have a profitable business model, so owners shouldn’t bother getting appraisals for small operations that add little value to the property.
  • The business must have a support system for selling products legally.

USPAP appraisers may offer their services even when a business doesn’t meet these requirements. Unfortunately, the owner will likely get an appraisal that severely undervalues items such as grow lights and infrastructure for growing cannabis plants.

Member Appraisal Institute (MAI)

The Member Appraisal Institute (MAI) takes an evolving approach to appraising cannabis and hemp businesses, including real estate and assets. During the organization’s 2019 conference, appraisers discussed topics like:

  • Problems related to the federal government’s refusal to accept legalization.
  • The difficulties that many banks encounter when working with cannabis and hemp companies (because of the federal government’s position).
  • The continually evolving legal landscape and chaos prevalent in many emerging markets that make it difficult to appraise.

MAI doesn’t say that it won’t conduct appraisal services for cannabis and hemp real estate, businesses, and assets. However, it does make it clear that some of its agents do not have the expertise needed to complete evaluation projects with precision.

Getting Reliable Appraisals Within The Cannabis And Hemp Industries

To some extend, businesses in the cannabis and hemp industries face difficulties getting reliable appraisals because appraisal companies don’t have much experience working with them. This situation will likely change as more states adopt medical and recreational cannabis laws. The federal government’s future decisions could also play a critical role in appraisal precision.

The disconnection between the government and the cannabis and hemp industries creates problems. Anyone involved in the industry, however, knows that businesses have exceptional value.

One group estimates that the legal cannabis market will reach $73.6 billion by 2027. With that much money involved, appraisers will step up to get involved. They cannot afford to ignore such a rapidly growing industry.

Factors To Consider When Appraising Cannabis And Hemp Companies

Many of the factors that appraisal companies need to consider when working with cannabis and hemp companies are the same as the factors considered when working with businesses in other industries. Unfortunately, appraisers may not fully understand the importance of land features, equipment, and business potential.

License Status

Cannabis & hemp license status, type, location, and rarity are some of the most influential factors in appraising an existing business or property.  

Outdoor Land For Growing Cannabis And Hemp

Cannabis and hemp have high values compared to most crops. However, growing these crops often means that farmers must invest significant amounts of money in outdoor infrastructure. One bad year could make it impossible to recoup their expenses, so farmers often build infrastructures that include:

  • Irrigation systems.
  • Coverings and buildings that protect crops from inclement weather.
  • Delivery methods for organic pesticides, herbicides, fungicides, and nutrients.

Outdoor growing also takes a lot of hard work, which means paying trained employees.

In return, some outdoor cultivators find that they can position their products to sell at higher prices than cannabis grown indoors. Therefore, the businesses may have higher appraisal values because they have the potential to earn more money.

Indoor Growing Facilities For Cannabis And Hemp

Starting a business that grows cannabis and hemp indoors requires a tremendous investment. The upfront costs include money used to buy:

  • Lighting that creates a light spectrum that encourages fast growth and budding.
  • Hydroponic systems that deliver nutrients and moisture to cannabis and hemp plants.
  • Commercial or industrial real estate that can replace the large amount of land needed to grow plants.
  • Security that prevents thieves from stealing crops and cash money kept on the premises.

Other Assets Cannabis And Hemp Businesses May Own

Developing new products within the hemp and cannabis industries often forces businesses to invest in new assets.

Iron Fist Extractors, for example, make it possible for cannabis and hemp companies to develop a wide range of products, including concentrates and oils. Even basic models like the Iron Fist Extractors EX-40 can cost thousands of dollars to purchase. Larger options like the Iron Fist Extractors EX-80 can process much more plant material, but the price goes up quickly.

Businesses that use these and other types of industry-specific assets must make sure that they get the full value of their equipment during appraisals.

Business Reputation And Connections (Goodwill)

A cannabis and hemp company that has been selling high-quality products to vendors for years should have an excellent business reputation that makes it more valuable than a new business struggling to develop relationships. 

Reviewing revenue and expense reports help reveal the business’s true value. The industry’s quasi-legal status, however, creates challenges. Appraisers may need to rely on unofficial documents and think about the long-term growth potential of a company that has already established relationships with most local vendors.

Questions to consider include:

  • How do vendors and consumers respond to the grower’s brand?
  • Does the company have much room to grow in the current industry?
  • How does the evolving legal landscape create opportunities for cannabis and hemp businesses?
  • Has the business expanded its range of products to include options like edibles, oils, concentrates, and flowers?

Benefits Of An Accurate Appraisal

Accurate appraisals can help businesses in several ways. For example, a cannabis and hemp company with a high appraisal may find that it’s easier to access funding. Owners that want to sell their businesses also need accurate appraisals to get fair prices for their brands, land, and assets.

January 31, 2021Comments Off
How to Manage Risks in the Cannabis Industry

It is no secret that the cannabis industry has a lot of associated risks that business owners need to be able to preempt and take the necessary steps to protect themselves from. There are different types of risks that should be evaluated in order to ensure your business thrives. Here are a few types of risk and how you can protect your business from them.

General Liability

A cannabis business is not much different than any other business when it comes to operation risk– Liability insurance (also known as Commercial General Business Liability) protects a company’s assets and pays for obligations – medical costs, for example –incurred if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees and is a good starting point for insurance for any business (not just cannabis business).

Legal and Statutory Risks

These are the most common risks that your cannabis business can be exposed to. There are numerous rules and regulations that guide the conduct of business in the industry. It does not help that each state in the country has their own specific laws too. Therefore, it goes without saying that you should be interested in protecting your business from these risks. A good way to do this is to seek for help from professionals who understand the industry and will be able to provide solutions that best suit your business. You can hire compliance officers to help you manage these risks. They will also handle the policies of your company more efficiently especially because they have the needed knowledge and they will also be able to look at your company’s situation from an objective perspective, thereby ensuring that there are no oversights due to any form of bias.

Contractual Risks

These involves risks due to contracts that may include local zoning laws, land ownership disputes and these risks are also common. Contracts usually contain a lot of complicated legal jargon that can be properly interpreted by a competent legal counsel. It is best that you seek extra help from a local licensed attorney even though it may be expensive. However, you should view it as an investment that will be beneficial in the long run. Additionally, an attorney will be able to help you write your risk management policies and they will also scrutinize every contract to ensure that the interest of your company is protected at all times. They will also help you establish the standard operating procedures with respect to the content of the contract, access to the contract, authority to modify contract and of course, termination of contract.

Reputation Risk

The public’s perception of your company is as important as what your company does, or even more important in some situations. In today’s world, the power of social media should not be underestimated especially because any corporate decision, actions or decisions can become public knowledge within minutes. It is therefore important that companies strive to maintain a good public image and avoid any risks posed by a bad reputation. It is advisable that you enforce strong corporate values and ensure that your employees believe and adopt them as well. In addition, it is important that you scrutinize every step of your production and supply chain for possible risks to your reputation and formulate strategies that will be used to eliminate or reduce them.

Product liability

This is one of the most important risks that a cannabis business will have to deal with. The provisions of the law regarding product liability varies from state to state, but the implications are generally the same thing. The law holds the producers, retailers and distributors accountable for any product liability. It cites strict liability, oversight, implied or express warranties and falsification or misrepresentation of concepts. This is a huge cause for concern among retailers and it results in them mounting pressure on the producers to improve on and maintain the quality of their products. Product liability is quite expensive and it is estimated that damage awards could be up to $350,000. This liability is most important for products that are ingested like edible products. The good news is that there are several ways by which you can reduce the risks of product liability.

Comprehensive Documentation

Documentation is one of the most important steps in ensuring your business has complete protection from the risks posed by product liability. With proper documentation, you can prove that your company followed all the good quality production guidelines, in the case of a lawsuit or even for inspections. Ensure that you have proper batch identification and also have informative labels on every product, bearing all the necessary information which include content, strength, date of manufacture, batch number, directions for use, storage advice and expiration date. It should also contain warnings where necessary and they should be clearly spelt out in a way that they can be easily understood. Proper documentation makes it easier to track a product in case of any problems down the line.

Take advantage of the product life cycle

Every product has a life cycle that has different stages which include pre-production, production, and post-production. When each of these stages are treated individually, it is a whole lot easier to figure out the different possible risks at each stage and how best to prevent them. It also makes it easier to improve on the quality of the product. This can be achieved by ensuring the design is flawless, the process is controlled and the products pass proper inspection tests before being released for consumption. Every step of the production process is subjected to routine inspections to ensure the final product meets all quality requirements.

Independent testing

It is advisable that every batch of your product should be inspected by a third party with no ties to your company that may result in bias. The aim of the testing is to ascertain the quality of the product and to ensure that the product is wholesome and free of contaminants and unwanted ingredients. After the results of the test have been obtained, it is also recommended that the test facility keep small samples of each tested batch for three months as “controlled” samples.

There are several other tips that would be helpful in protecting your business from the risks due to product liability. Your insurance provider will be able to provide more information. However, here are a few extra tips to help protect your business: Use a batch number for products in order to easily identify a lot that needs to be recalled

  • Use packaging that prevents tampering and preserves the quality of the product.
  • Make use of an efficient system that can capture patient information, product testing, and sample recall.
  • Ensure your retailers and vendors have their own insurance cover

In conclusion, the cannabis industry has a lot of risks, but by taking the necessary steps, you can preempt the risks and protect your business. With the right information and by securing experienced and professional help, your business will be better off for it in the long run.

December 3, 2020Comments Off
Federal Cannabis Legalization: Coming Soon?

The cannabis industry needs federal legalization, and it needs this legislation now. Although cannabis is legal in some form in most states, the lack of federal approval creates many unnecessary roadblocks to success, including problems with financing, insurance, supply chains, investment, etc. The patchwork of state laws is harming the industry and stunting its growth.

Two-thirds of the American public is firmly behind the legalization of cannabis, but there is a political divide. Nearly 80% of Democrats or those leaning Democrat support legalization while only 55% of Republicans and those leaning Republican do. So more Democrats in power should make passing a federal law easier. 

The results of the latest election improve the odds of federal legalization, although it will take some months to be certain. The Democrats will control the executive branch and the House in January 2021. Senate control depends on two seats in Georgia that will not be determined until January. Voters in six states passed positive cannabis laws. With more states legalizing cannabis, it has a better chance of gaining federal approval, but success is not certain. In the short term, passage of the MORE Act would ease the way for cannabis entrepreneurs and VA doctors.

Federal Law Proposals

Several proposed laws are currently before Congress, and House Majority Leader Steny Hoyer (D) announced that one such law, the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, will be brought to the floor in December. While other Marijuana reform acts are currently before Congress, such as the Medical Marijuana Research Act, the MORE Act is considered the most comprehensive and important one up for vote. It would remove cannabis from the Controlled Substances Act, which would reduce the friction between state and federal law. The act would also let VA Administration physicians recommend medical marijuana to vets living in states where it is legal. Also, it would let states expunge the records of people with low-level cannabis offenses.

 And while the act is expected to eventually pass the House, it’s unclear if that will happen in December or be postponed until 2021. Some lawmakers are worried about focusing on marijuana legislation before they pass another COVID-19 relief bill. 

Passage in the Senate will be more difficult if the leadership remains the same and clings to its current position on advancing and passing the act. In fact, progress may be delayed until early 2021.

State Law Changes

As more and more states embrace legalization, it becomes harder to reject it on the federal level. five states just voted for more favorable cannabis laws this election, including Arizona, Mississippi, Montana, New Jersey, and South Dakota. Now, a total of 15 states has approved cannabis for adult recreational use. Most other states allow some level of medical use. Only seven states, Idaho, Wyoming, Nebraska, Kansas, Tennessee, South Carolina and Alabama, ban all marijuana use.

  • In Arizona, voters voted to allow adults aged 21 or over to possess up to one ounce of marijuana and be allowed to cultivate a maximum of six plants for personal use. Voters rejected this same initiative four years ago. 
  • Mississippi voted to allow medical marijuana – up to 2.5 ounces per 14-day-period for certain debilitating conditions. 
  • Conservative Montana passed a resolution to legalize marijuana for those aged 21 or over. 
  • New Jersey voters passed a resolution for legalizing adult use, and the legislature is on a fast track to making that happen, according to Governor Phil Murphy, an advocate of the measure.
  • South Dakota went from banning all marijuana use to making recreational use legal for those 21 or over. Citizens with debilitating medical conditions will be able to purchase marijuana as well. 

With many states embracing legalization, US legislators don’t have much of a rationale for maintaining the federal ban. In fact, the general feeling in the US is that it’s past time to take action and change federal law. 

Senate Positions on Legalization

So far this year, the Democrats have failed to take control of the Senate despite polling that indicated they would. Currently, the two parties are tied at 48 senators. However, in the two Georgia Senate races, no candidate managed to get the mandatory 50% of the vote needed to win. According to Georgia law, the state must now hold a runoff election to determine the winners. So in January 2021, voters will cast their ballots in two Senate races that will have an enormous impact on the US government and its stance on cannabis.

Democratic Senate control would probably lead to federal legalization because Chuck Schumer would become the Majority Leader. He has already pledged support for a cannabis bill and would make it a priority. Nancy Pelosi, the Democratic Speaker of the House, has made similar promises. If a Democratic House and Senate passed legislation, the pressure on the President.

Most Republican legislators support legalization, but the party leadership does not. Current Majority Leader, Mitch McConnell, is not a supporter of a bill and would be unlikely to even bring one to the floor for a vote. If Republicans keep control of the Senate, the chances of passing a federal law are slim. For instance, David Perdue, one of the Republican Georgia candidates, wants to leave cannabis laws to the states and not take federal action. A Democratic candidate, Jon Ossoff, believes Congress should pass a federal law to legalize marijuana. Georgia could well determine cannabis policy for the foreseeable future. 

The End Game

The cannabis industry would become more profitable and attract more investors if it were legal on the federal level. Currently, the differences between state law and federal law pose many costly complications, including funding and supply problems. Federally insured banks cannot provide traditional loans, and transporting the product across state lines raises tricky legal issues. Also, selling cannabis for recreational use is a simpler process than selling medical marijuana, which comes with mounds of red tape. In fact, the reasons for federal legalization far outweigh the reasons against it.

The prejudices against cannabis are wearing away, and most Americans accept it for both medical and recreational use. Still, there are holdouts, and many of those are in government, particularly in the leadership.

November 12, 2020Comments Off
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