Cannabis companies that need more money than they can generate through sales generally have two options: borrow money (debt) or solicit investments (equity). Over the years as the industry has constricted, equity finance became less of an option. I recently predicted that equity investment will reignite when cannabis is rescheduled. But that hasn’t happened yet, which means that cash-hungry cannabis companies need to borrow money. And because of high taxation, overregulation, the illegal market, and so on, many if not most cannabis companies need cash.
Not surprisingly, over the years I’ve seen massive increase in debt transactions as investments decreased – both original financings and refinancing. Today, I want to look at some of the things that cannabis companies should expect when looking for cannabis loans.
Traditional lenders won’t work with cannabis companies
Cannabis companies can’t just walk into a big bank and draw a commercial cannabis loan. Many banks (especially the big ones) and institutional lenders are still too skittish to do business with cannabis companies. You can read about that here. This may change if cannabis is rescheduled, but probably not too much. Unless federal law changes to unequivocally treat cannabis as a federally legal commodity, the bigger banks
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