Hard Money Loans for Marijuana Banking In Colorado

There is a dire need for a banking solution for the newly legalized marijuana industry in Colorado. A few months ago, MBank announced that it would provide banking services to marijuana-related businesses. For a moment, things appeared to be looking up for the cannabis industry only for the bank to back out a week later.

last updated Wednesday, May 17, 2023
#Hard Money Loans #Marijuana Banking in Colorado

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John Burson

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In their announcement, the MBank management cited infrastructural problems as the reason for pulling out of the lucrative market. However, sources from inside the bank point to federal constraints as the real reason for the bank going back on its word. The Federal Reserve must approve before a bank or any other financial opens an account for any business. It turns out the feds aren’t such big marijuana fans.

So, What’s Next for the Cannabis Business?

Marijuana-related business activities will have to deal with cash for the time being. Federal regulations restrict banking institutions from offering banking services to the 2,200 growing, manufacturing, and retail marijuana businesses in Colorado. The use of cash in all marijuana-related business transactions poses a significant risk of spiraling the rate of violent crime within the industry. But hard cash will have to suffice until the Federal Reserve changes its position.

Colorado Cannabis Industry Hard Money Loans

The lack of banking solutions for the Colorado cannabis industry has led to the emergence of hard cash lenders. These cash loans are privately funded and directed at investors and property owners whose properties house marijuana businesses. The status quo has increased the value of properties (warehouses and retail stores) occupied by marijuana businesses.

Temporary Solution

Hard cash loans are just a temporary solution to the problem in Colorado. Typically, these are short-term (loan term ranges between 6 months and two years) loans, but the loan term can be extended if necessary. Property owners can use these loans to set up the appropriate infrastructure inside these warehouses. It wouldn’t be possible to lease these properties to marijuana businesses without this funding.

There is still hope that the Federal Reserve will change its stance on the banking situation, and when this happens, property owners will be able to refinance their hard cash loans. Right now, the Colorado cannabis industry is dependent on private funding to acquire warehouses for marijuana-related businesses.

 
 
 

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