Is The Cannabis Industry Rigged Against Small Businesses?

Posted by E1011 Labs on

The legal restrictions around hemp and marijuana have significantly loosened in certain parts of America during the last decade. As a result, the cannabis trade is moving out of dark alleys and into the boardroom. For many early investors in the hemp market, business is booming. Last year alone states with legal marijuana took in an additional estimated $2.7 billion in taxable revenue, and projections are only going up. 

With record-breaking profits year after year, do you ever wonder, who’s getting all this money? Can anybody get into the cannabis business?

Cannabis And The American Dream

With enough hard work, anybody can pull themselves up by their bootstraps and forge for themselves their own piece of the American dream. At least, that’s how the narrative goes. However, for most people in this country, that tired concept of the American dream is only that—a dream. 

For those of us without access to intergenerational wealth to fall back on, hard work and a sound business model don’t necessarily translate to success. This is especially true for the most marginalized of our community, where practices like systemic loan denial, redlining, and limiting access to education have effectively hamstrung an entire group of people. With such glaring inequalities, it’s difficult to think of this nation as a true meritocracy. 

In many ways, the cannabis industry and the hemp marketplace are more progressive than other comparable markets. More women hold more executive positions in the cannabis field than in other businesses, and leaders in the cannabis industry are often putting time and resources into criminal justice reform initiatives, for example...However, it’s often much more difficult for a would-be entrepreneur to start their own marijuana or hemp company than it is to open any other kind of retail establishment. 

The Importance of SAFE Banking

Without the necessary startup capital, it’s impossible for any kind of business to get off the ground. Applying for a traditional bank loan is already fraught with pitfalls, high interest rates, and discriminatory lenders. Trying to get one for a cannabis venture is flat-out impossible. 

That’s because current financial institutions refuse to lend to any cannabis business for fear of repercussions from the Federal Government. Even in states where legal hemp flower and marijuana marketplaces are already in place, getting a business loan from conventional lenders is extremely unlikely. As a result, the people most poised to enter the cannabis industry are those who already have large chunks of capital. 

For the past three years, the United States Congress has been attempting to pass the Secure and Fair Enforcement Banking Act (SAFE), which would allow for banks to extend their services to the cannabis industry without worrying about potential legal ramifications.

Not only would the SAFE Banking Act allow for a new crop of entrepreneurs and small business owners to enter the cannabis industry, but it would also make it safer for workers. Because cannabis businesses are cut off from all banking services, dispensaries mostly deal in cash-only transactions. Having to keep all this cash on hand makes marijuana businesses prime robbery targets.

Originally, the house tried to include the SAFE Banking Act as part of their covid relief package, but it was eventually left out of the final piece of legislation. Earlier this year, a stand-alone version of the bill passed the house with a rare show of bipartisan support. Now it just has to clear the Senate and get approved by the Biden Administration. To keep up with the status of the SAFE Banking Act, as well as all other things hemp and marijuana-related, follow Hemp Industry Daily and Marijuana Moment.

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