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.
- 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.
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.
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.
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.
420Loans.com is one of the best-known sites for connecting growers and distributors to financial services including real estate loans, equipment loans, business loans and insurance policies. They also provide information on most aspects of the hemp and cannabis industry. New people can break into the industry, but they need to understand the difficulties first. 420Loans keeps 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.