{"id":286773,"date":"2019-10-16T15:20:00","date_gmt":"2019-10-16T20:20:00","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/cannabis-law\/starting-a-cannabis-business\/how-to-get-financing-for-a-marijuana-business.html"},"modified":"2023-07-23T13:14:06","modified_gmt":"2023-07-23T18:14:06","slug":"how-to-get-financing-for-a-marijuana-business","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/cannabis-law\/starting-a-cannabis-business\/how-to-get-financing-for-a-marijuana-business.html","title":{"rendered":"How to Get Financing for a Marijuana Business"},"content":{"rendered":"\n
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How to Get Financing for a Marijuana Business<\/h1>\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Amber Sheppard, Esq.<\/a>\n | Last reviewed\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

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Banks are also hesitant to offer business funding to cannabis companies before the federal legalization of recreational marijuana. This is because banks want to avoid criminal liability. A bank that funds a cannabis business could get charged with aiding and abetting.<\/a> Accepting deposits from a cannabis dispensary is technically money laundering. <\/p>\n\n <\/div>\n\n

All startups need funding options to succeed in their respective market. But the status of marijuana at the federal level makes things complicated. As a result, financial institutions and lenders have shied away from cannabis business owners<\/a>. Even so, a few banks and credit unions have begun providing merchant services. These services include lines of credit, credit card processing, and even some loans. Several private investors and alternative lenders have also taken advantage of these investment opportunities.<\/p>\r\n

This article provides financing solutions for small business entrepreneurs<\/a> seeking marijuana business loans. It also looks into why institutional banks have been hesitant to get involved.<\/p>\r\n

Why Most Banks Avoid Cannabis Business Loans<\/h2>\r\n

The main reason banks will not provide business financing to marijuana ventures is because of Federal Deposit Insurance Corporation (FDIC<\/a>) regulations and policies. Generally speaking, the FDIC will not insure a bank that takes on "existential" risks. This includes loans to companies in violation of federal law. Yet, some banks are willing to consider financing options for marijuana-related businesses. These businesses avoid the legal risk of actually "touching" the plant.<\/p>\r\n

But the federal government has rarely enforced this. The Department of Justice tolerates marijuana businesses<\/a> in states where it’s legal, such as Colorado. Until the federal government legalizes the recreational use of marijuana, cannabis financing options will remain slim.<\/p>\r\n

Private Equity and Other Sources of Financing for Cannabusinesses<\/h2>\r\n

Several private investors have taken up the slack. These investors back marijuana businesses in the relative absence of bank loans<\/a>. They include venture capital funds, angel investors, and marijuana business consulting firms. Like a bank, a private investor requires a cannabis business to go through a loan application process. In general, a private investor needs a marijuana business seeking a loan to:<\/p>\r\n