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The Rubinstein Law Firm Logo

For Legal Help, Call
248-220-1415

COVID-19 ANNOUNCEMENT: The Rubinstein Law Firm is dedicated to helping you with your legal needs during these challenging times. We can meet with you virtually (Skype, FaceTime, etc.), or by telephone.

Most banks avoid loans to marijuana businesses

| Feb 22, 2021 | Business Law, Marijuana Industry

Just about every new business or startup needs financing. It may happen at the beginning of the process to pay for initial costs, or it may be to help organically grow the company to the next level. This financial support may come as a bank loan, but those getting into marijuana-related businesses will often need to look elsewhere for financial support.

Despite being legal here in Michigan, marijuana is still illegal at the federal level. This ambiguous legal standing prompts banks and credit unions to avoid loaning money to new marijuana-related businesses. One reason for their caution involves the Federal Deposit Insurance Corporation (FDIC), which will not insure loans it deems risky because the industry violates federal law. The banks also want to avoid exposure to business activities that are considered a felony (such as the manufacturing or sale of the drug). They also want to avoid the appearance of money laundering by accepting deposits from marijuana-related businesses.

There are other options

These new businesses can turn to other sources for funding:

  • Private investors: This can include venture capital, wealthy individuals or private equity funds.
  • High-risk firms: Some investment firms specialize in risky ventures, but they will still often require specific requirements like an established bank account, incorporation, monthly sales targets, and an acceptable credit score.

Other business necessities

There are other services that a business needs to operate above board, particularly if there are investors. This includes the need to deposit money in bank accounts, third-party services for debit card sales, and the ability to cut checks to staff, investors and municipal agencies.

Emerging legal field

Fortunately, some far-sighted attorneys serve marijuana-related industries. They can help with such issues as creating a new business, staying current with all laws and regulations in this rapidly changing business, and structuring deals with potential investors.

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