Even if forecasts for the legal cannabis industry continue to be largely bullish for many would-be entrepreneurs, the barriers to entering the industry are steep. On top of the long, arduous, and costly process of applying for a cannabis business license, there’s an uncomfortable truth that’s only now receiving the attention it should: A pervasive lack of social equity prevents many businesspeople from entering the market in the first place.
If you’re wondering how to open a dispensary without adequate cannabis financing, there are hopeful signs that the landscape is changing. In today’s post, we’ll share a few examples, as well as discuss why many banks and institutions remain wary of financing cannabis business ventures. Our hope is that by shedding light on this topic, we can help mobilize other states and municipalities to step up their efforts—and support real and lasting social equity in the industry.
Cannabis Business Funding: Institutional Challenges
Denied basic banking services in the first years of the legal cannabis industry, most dispensaries were forced to handle large amounts of cash. Leery of running afoul of federal banking regulations, a small number of financial institutions currently service the cannabis industry.
The picture is rosier than it once was, though many hurdles still remain. As of the most recent data, more than 500 banks and roughly 170 credit unions work with the cannabis industry in a transparent and legal manner, according to the Financial Crimes Enforcement Network (FinCEN). Still, not all of these banks work with all sectors of the industry, making it all the more challenging to connect with adequate sources of funding.
This problem is magnified for some entrepreneurs by the issue of social equity, and the dawning awareness that certain populations—such as those most impacted by the War on Drugs—face significantly greater barriers to entering the industry than do others.
Fortunately, a greater number of cities and states are taking decisive steps to counter this. Here are some examples of the leaders.
Social Equity in Cannabis: City-Run and State-Led Efforts
As the first state in the world to legalize adult-use cannabis, Colorado holds a special place in the cannabis firmament. But recognizing that significant inequity remains, last year the state launched the Cannabis Business Office. Tasked with incentivizing participation by historically marginalized groups, the office offers grants, low-interest loans, and technical assistance to entrepreneurs who qualify under Colorado’s social-equity program.
In New York marijuana news, the Marihuana Regulation & Taxation Act (MRTA) aims to do much the same thing. With the stated goal of promoting applicants from communities disproportionately impacted by cannabis prohibition, the MRTA also goes a step further. Pledging to “promote racial, ethnic, and gender diversity when issuing licenses for adult-use cannabis related activities,” the Act includes provisions for providing mentoring for such applicants, as well as those who qualify as minority or women-owned business, a distressed farmer, or service-disabled veterans.
How to Open a Dispensary: Get Experience and Expertise on Your Side
New York and Colorado are hardly the only examples of forward-thinking cannabis equity programs. Illinois has repeatedly made headlines for its robust grant programs designed to redress justice system excesses. A couple of years ago, Illinois’ governor even signed off on half a million cannabis-related criminal record expungements.
Rest assured we’ll continue to report on social equity initiatives in cannabis. At Bridge West, we’re firm believers in ensuring our clients have access to all possible financial, planning, and advisory services to support successful entry into the legal cannabis industry. If you’re ready to join this fast-moving and exciting moment in cannabis history, we’d love to help you achieve your dreams. Reach out anytime.