Why Don't Banks Offer Cannabis Business Loans in Arizona?

Friday, March 8, 2019

Why Don't Banks Offer Cannabis Business Loans in Arizona?

Most start-ups need a helping hand, but if you’re getting into the marijuana industry, you’ll find banks rarely offer Cannabis Business Loans in Arizona. A lot of this has to do with bureaucratic red tape, but you can cut through it with alternative lending.

The marijuana industry is booming now, thanks to favorable legislation enacted by most states. It’s no longer spoken about in whispers, but in professional circles and in terms of dollars and cents. Many savvy investors have jumped into the emerging sector, and with great success, but if you’re trying to start your own grow operation, dispensary, or are homing in on another aspect of the MJ industry, you’ll find it’s hard to break in due to funding shortfalls.

Small-business owners have always had trouble getting financing. Even today, most who apply don’t get the full amount they need. Banks attribute this to poor credit scores, lack of time in business, and sluggish cashflows. However, starting a marijuana company isn’t like opening an ice cream shop or running a farmer’s market. If you’re trying to get Cannabis Business Loans in Arizona, there are additional challenges thanks to the government.

In short, most banks are insured by the Federal Deposit Insurance Corporation (FDIC), meaning the government protects those who deposit there in the event that the bank loses the consumer’s money. Not all deposits are protected, and not all banks are FDIC-insured, but a great many are. The FDIC won’t touch banks that take on “existential risks,” or those that fund businesses and individuals that could cause major issues for the bank. Although states have moved to legalize marijuana, it’s still illegal at a federal level, and as such, the feds aren’t going to insure banks that lend to the industry either.

Alternative Lending Doesn’t Have the Same Regulations

Alternative lending sources can be thought of as almost anything beyond banks. This includes things like crowd-funding, peer-to-peer lending, angel investing, and private money. These sources aren’t dealing with FDIC-insured deposits, so there’s no risk of losing their status, and they don’t have to follow the FDIC’s rules. However, even within this subset, you’re still dealing with lenders who may or may not support your endeavors, and they’re often looking for things like good credit and an established track record—something someone seeking Cannabis Business Loans in Arizona won’t have because the industry is still so new.

Hard money may be right for you if you’re running an MJ startup.

Hard money, provided by private lenders, is often the best bet for those starting a marijuana-related company. You can get Cannabis Business Loans in Arizona to cover the cost of your building and your equipment, even if you have rotten credit. The only real catch is that you need to be business-minded. These lenders are only looking for people who know how to grow the green stuff—money. If you can nail that aspect down, you can get your startup funded with hard money, even if the banks won’t touch you.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.