Despite the absolute meteoric rise of the cannabis industry, finding CBD financing and a hemp-friendly bank is still a struggle. Even the hemp industry – which isn’t classified as a Schedule I illegal substance – faces considerable difficulties finding hemp-friendly banks.
It’s a strange situation for many growers. The federal government legalized industrial hemp plants under the 2018 Farm Bill. The result has been an explosion in CBD-related products. Indeed, CBD sales are expected to go all the way to $24 billion by 2023.
However, CBD financing is often hard to come by – with the majority of banks and other financial institutions shunning this lucrative industry. In fact, it can be harder to access CBD financing than cannabis banking due to a significant lack of established guidelines.
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Below we’ll discuss how businesses can access CBD financing via hemp-friendly banks. We’ll also explain why it’s all so difficult and how that could be about to change.
After hemp production was legalized following the 2018 Farm Bill, CBD industries rapidly expanded, leading to the emergence of CBD financing. Banks and other financial institutions were reluctant at first, however. Because America lacked the legal and regulatory framework to allow for rapid expansion of the hemp industry, many banks treated the enterprise as high risk.
Even businesses that do get loans see exorbitant interest rates. That’s gradually starting to change. However, lenders are often still hesitant to provide financing to CBD startups, regardless of the industry’s success.
Not all loans are created equally. Just as businesses have different needs, so too are there different CBD loan types. Here’s a breakdown of the most common:
While these are the most common types of loans relating to what’s being purchased, CBD financing does have a couple of different funding models:
You should never rule out approaching your friendly neighborhood bank. But such finances cannot form the backbone of your business plan. It’s more than likely you’ll be rejected.
So, who do you turn to?
Safe Harbor is one of the few financial institutions offering cannabis and hemp industry loans. Clients must have been with Safe Harbor for at least six months to qualify. The primary purposes of the loan are retail-orientated. For example, to purchase or refinance commercial property.
For hemp growers in dire need of funding, it’s an absolute lifeline.
Other financial institutions also exist that handle CBD financing in some ways – though many don’t advertise this fact openly. PenFed Credit Union serves Virginia and North Carolina, providing a fantastic refinancing program for anyone, including hemp-related businesses.
In California, meanwhile, Patelco Credit Union has served the Bay Area for the last 80 years. As a not-for-profit, member-owned bank, they’re by far one of the best options in the state.
Currently, many big banks are merely dipping their toes in the water. Chase Bank, for example, allows CBD-related bank accounts but won’t provide payment processing services. Part of the problem remains the legal discrepancy.
Even on this front, there are positive signs of change. Despite being beset by delays, the SAFE Banking Act promises to stop federal banking regulators from penalizing financial institutions associated with cannabis-related businesses. Given the blurred line between the hemp and cannabis industry, such penalization often prevents access to CBD financing.
If the law changes, hemp-friendly banking will likely become much more common. Banks will offer loans safe in the knowledge they won’t be prosecuted – even if such risks are tiny at present.
Still, with so many CBD sellers and businesses starting and growing, it’s likely banks will be somewhat hesitant about lending going forwards. It’s hard to predict the winners when the market is being swamped. You can preempt their concerns by providing all relevant documentation and staying honest and transparent about your business.
Do you own a hemp, CBD, dispensary, marijuana, or cannabis business and need a business bank account? We’ve validated over $8 billion dollars in cannabis-related funds since 2015. Bank with confidence. Bank with Safe Harbor Financial today.
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