The Farm Bill – Opening the Door to Loans and Financing in the Hemp Industry.

The Farm Bill – Opening the Door to Loans and Financing in the Hemp Industry.

With the Farm Bill passed, there are some experts who are forecasting that the hemp growing industry could exceed $20 billion by 2022. Up until the passing of this bill, the industrial production of hemp in the United States was limited to mainly pilot or research programs.

An Overview of the Farm Bill for Hemp Growers

The Farm Bill was long-awaited by those in the industry and removes industrial hemp from the list of controlled substances created by the federal government. With the removal of this classification, it is now a lawful, agricultural commodity in the U.S.

Originally, this hemp legislation was introduced by Mitch McConnell a Republican from Kentucky and the Majority Leader for the Senate. In addition to removing hemp from the controlled substances list, the law also allows states to become the main regulators for the cultivation of hemp, while enabling researchers to apply for and receive federal grants, and even allows the crop to be eligible for crop insurance.

Today, the $800 million hemp market in the United States is mostly made up by the non-psychoactive compound CBD. Products with CBD can be used for treating an array of medical conditions, which range from arthritis and epilepsy to multiple sclerosis and chronic pain. Each state has unique laws that regulate the use and production of CBD.

Financing Options Before the Farm Bill

Prior to the passing of the Farm Bill, funding options for growing hemp in the U.S. were significantly limited. There were many entrepreneurs who opted to self-fund using business profits or personal savings.

While options weren’t widespread, there was equity and debt financing resources for this industry. One such company, the Colorado-based Dynamic Alternative Finance has helped to arrange the financing of more than $27 million in leases and loans for cannabis and hemp businesses in the past two years. This was done by connecting the network of private investors they had built with the business owners who were looking for capital to grow their business.

Since there weren’t many traditional lending options, and no government programs or SBA to help, many entrepreneurs in this industry opted to take out a home equity line of credit, raise funds through family and friends and use their credit cards.

There were a few smaller banks willing to fund businesses in this industry, and in the state of Colorado there were at least eight, but fewer in other states. One of the biggest factors that made lenders hesitant to fund these businesses prior to the passing of the Farm Bill was that technically, the federal authorities could raid and shut down the business down at any time.

Benefits of the Farm Bill for the CBD and Hemp Industries

With the passing of the Farm Bill, those in the hemp industry are experiencing a wide array of benefits. Now, the industry is projected to grow significantly, and since hemp is no longer considered a controlled substance, there are no federal regulations that restrict farmers from being able to grow or sell hemp.

Another benefit of the Farm Bill is for those companies that focus on hemp-derived CBD. Without a ban on this product, entrepreneurs in this industry can gain access to financial services that are vital to the operation, growth, and sustainability of a business i.e. bank accounts, credit card processing, mortgages, and business loans.

 

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December 14, 2018 / by / in

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