Regulators Allowing Cannabis Licenses As Collateral For Loans In Maryland

Regulators Allowing Cannabis Licenses As Collateral For Loans In Maryland

The Maryland Medical Cannabis Commission passed a new rule this week that will allow cannabis business owners to use their licenses as collateral for bank loans, reported the Baltimore Business Journal.

Chris Chick, the chief lending officer of CFG Bank - one of the few Maryland banks known to lend to medical cannabis businesses - called the new policy a “step in the right direction.”
Running a cash-only business doesn’t come with a formal price tag, but it does have two significant costs, public safety, and inefficiency, according to Eric Kaufman, chief revenue officer of Dama Financial
The biggest price of operating in cash is the security threat it poses. Many cannabis businesses dedicate hours to counting currency. This also represents a problem to pay utility bills and cover basic expenses using prepaid debit cards and other heterodox payment methods. 

The new policy in Maryland establishes the framework for a lender to obtain a security interest in the proceeds from a cannabis commission-approved sale of a grower, processor or dispensary license.

The new policy addresses:
● Eligibility requirements for secured creditors;
● The process for a secured creditor to obtain a security interest in the right to the proceeds from a Commission-approved sale of a medical cannabis license;
● Eligibility requirements for a receiver;
● Security protocols applicable to receivers; and
● The disposition of a medical cannabis license.
Jacquie Cohen Roth, who runs CannabizMD, an education and consulting business, noted that allowing license-holders to use their license as collateral will help local and minority-owned businesses break into the field, though it won’t necessarily help them thrive. “That takes educational and legal support that most folks just don’t have,” Cohen Roth said.

Women and Minorities Underrepresented in the Cannabis Industry:

According to a new report done by the research team at MJBizDaily, the cannabis industry is not an exception to the general underrepresentation of women and minorities in the overall US economy.

In 2021, minority executives were also very low in the charts, representing only 13.1% of the overall managerial positions, in line with the average across all U.S. businesses.

Some states like New York and Massachusetts are working to create social equity programs to promote representation. However, due to a lack of economic capital and other concerns, many BIPOC are unable to qualify for dispensary licenses.

The adult-use cannabis industry in Massachusetts consists of nearly 16,667 active Marijuana Establishment Agent registrations: 35.4 % identify as female and 64.1 % identify as male, while 72.4 %  identify as White, 7.6 % identify as Hispanic, Latino, or Spanish, and 6 % identify as Black or African American.

Posted In: CollateralloansMaryland Medical Cannabis CommissionCannabisNewsMarkets

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