(machine whirring)
- We are required to take a lot of cash
and cash is expensive to handle, it's cumbersome
and it creates a whole nother boatload of challenges.
We need all the services
that most businesses use.
We just wanna operate like a normal business.
- [Narrator] The legal cannabis market in the US
achieved about $20 billion in sales in 2020,
according to industry analysts.
That could grow to over 40 billion annually by 2025.
Still, most big banks won't work with cannabis companies
because marijuana is illegal under federal law.
And the regional banks or credit unions that do
often offer minimal services
with high fees but that could change
with the Safe Banking Act,
which passed the house in April.
If it became law, cannabis sales
would no longer be considered illegal,
making the banking system accessible
to the cannabis industry.
The bill's fate in the Senate is uncertain
but many in the industry are encouraged
by the growing number of states legalizing the drug
in a Democratically controlled Senate
whose majority leader has voiced support
for broader legalization.
- In state after state,
through ballot initiatives
and constitutional amendments,
the American people are sending a clear message
that they want this policy changed.
- [Narrator] But some Democrats
and most Republicans oppose legislation
that would remove marijuana
from the controlled dangerous substances list.
(upbeat music)
So for now, these companies face a lot of restrictions,
like limited access to capital
and financial services like credit cards.
- I'm the CEO of Canna Provisions.
We're a vertically integrated
adult use cannabis company in Massachusetts
with the cultivation and also manufacturing on the way.
We basically accept two forms of payment.
One is cash and one is a debit card.
- [Narrator] Sanders estimates that roughly 40%
of transactions at her dispensaries involve debit cards.
That means the company has to deal with a lot of cash.
We have two full-time employees that just manage our cash.
We have to use an armored car service
in order to move our money
from our location to our bank.
It's expensive to have this service
but safety is a priority
and this is the safest way to do it right now.
- [Narrator] Even maintaining a bank account
can be expensive for cannabis businesses.
- For a typical cannabis operator,
the cost of maintaining a bank account
can scale up to about $10,000 a month.
- [Narrator] Nick Friedman is CFO of Theory Wellness,
a Massachusetts-based company
that also operates in Maine.
- Starting Theory, we didn't have a huge amount
of capital at the time
and we purposefully decided
to keep it private and not go to private equity,
simply looking to our own resources
and to friends and family to find the funds
to start the business.
We raised about $3 million.
- The industry has become much more sophisticated.
We're seeing it now taking hundreds of thousands,
if not millions of dollars to get operational.
If you only have one place you can go for loans
or investment capital,
then they have the ability to set the terms,
which means you're much less likely to get favorable rate.
We know businesses that are paying
20, 30, 40% interest rates on business loans.
As the cost for participating in this space has gone up,
it has meant that poor and minority communities
have faced much more of a challenge trying
to get a seat at the table.
(upbeat music)
- The challenge with it is you end up
giving a pretty good chunk of your company away
in order to get your company financed.
In Massachusetts, to open Canna Provisions,
we raised $5 million.
I would have wished we could have at least gotten mortgages
for our properties
because that would have been probably a million and a half
that I wouldn't have had to raise.
- We would expect some pretty consequential changes
to the industry landscape
if federal banking reform or something equivalent to it
were to pass.
The first thing we would expect to see
is a significant drop in the cost of financing the business.
And as a result, we would expect
to see a lot more entrepreneurs
start exploring opportunities in the space.
(pensive music)
- I think one implication would simply be the refinancing
of some of our debt,
which is at interest rates
that I would say is less reflective
of the risk state of our business
but simply more reflective of the limited supply
of capital that exists out there.
- Thank you, have a good day.
- We still have to borrow at interest rates
that are extremely high.
- We are doing very well
and any bank that I went to with our numbers
and our balance sheet and our P&L
would say how much do you want
and how quickly can I give it to you?
I can't do that right now.
You should be able to build on your success,
not only as a company
but also with your bank and financial institutions
to make sure that you can keep growing
as fast as the market needs you to.
And I think that's a big hindrance to us.
(pensive music)