From Handshake Deals to Bank Financing

Living in the hills of Southern Oregon, I have had the opportunity to work with multigenerational cannabis growers who were doing business long before recreational legalization. When I got my start in the medical days, it blew my mind how foreign "the system" was to some of them. Business had been conducted with cash and a handshake for decades. Then people like me showed up talking about tax returns and promissory notes. Not exactly the part of legalization everyone had been looking forward to.

For some, "getting on the grid" proved too difficult, and they chose to fade back into the background where they had been for years. Most of the people I worked with, however, saw the writing on the wall and took the steps to become "legitimate." That transition has not been easy. Growers lost far more money at the hands of unscrupulous people operating within the legal system than they ever did when everything was on the black market.

Some legacy farmers describe the days before recreational legalization as "magical." They remember substantial payouts for what they describe as part-time farm work, and many still long for those days. Whether or not the past was quite as good as everyone remembers, I understand the frustration. We asked people to come out of the woodwork, down from the hills, and onto the grid. They took on licensing, tax returns, and complicated compliance requirements, while the industry continued to face restricted access to banking and the burden of 280E. That has never seemed like a fair bargain to me.

Where banking access stands today

Schedule III has changed part of that picture for medical marijuana, including its treatment under 280E. But it has not opened the doors to ordinary banking and lending. Adult-use marijuana remains in Schedule I, and the broader industry still faces significant barriers to financial services.

The SAFE Banking Act of 2026 is intended to address some of those barriers by protecting financial institutions that serve state-sanctioned cannabis businesses. But it remains proposed legislation, not an enacted solution. Even if it passes, the legislation expressly does not require banks to serve cannabis businesses. Removing a legal obstacle to lending is not the same thing as requiring a bank to approve a loan.

What more access to capital would mean

Broader access to traditional banking and lending is only a matter of time, and when that happens, it will fundamentally change the cannabis industry. For operators who have spent years paying cash for nearly everything, access to reasonably priced financing will create opportunities that simply have not been available to them before.

Lending is all about leverage. Rather than having to accumulate enough cash to purchase a building, acquire another business, or make a substantial investment in equipment, operators will have the opportunity to use borrowed money to increase their purchasing power while preserving their own cash for other opportunities. Used properly, leverage can substantially increase the return on an owner's invested capital and allow a business to grow much faster than it could by relying exclusively on its own cash flow.

We will see considerable consolidation across the industry. Well-capitalized operators will have opportunities to acquire competitors, purchase additional licenses, and expand into new markets. Some owners who have spent years building their businesses will finally have an opportunity to sell to buyers who can obtain the financing necessary to complete a transaction. Others will be able to purchase the real estate they currently lease, invest in more sophisticated cultivation or manufacturing equipment, or expand their existing operations without exhausting their working capital.

There are also opportunities that are less obvious. Access to traditional lines of credit could allow businesses to manage seasonal cash-flow fluctuations, take advantage of favorable purchasing opportunities, and maintain adequate cash reserves without having to raise additional money from investors. Operators may be able to refinance expensive private notes, reduce their cost of capital, and improve cash flow simply by replacing unfavorable financing arrangements. Access to banking services will make it easier for businesses to offer retirement plans, employer contributions, and other employee benefits that have historically been more difficult for cannabis operators to administer.

Making sure your business is ready to borrow

In short, access to financing gives business owners more choices. They may no longer have to choose between purchasing a building and having enough cash to operate the business, or between opening another location and bringing in an investor who wants a substantial ownership interest. Debt is not always the best answer, and borrowing certainly comes with risks, but having access to it gives owners another tool for building wealth and growing their businesses.

This is where good financials can have a very real return on investment. A lender needs to be able to see the strength of your business, not simply take your word for it. Reliable financial statements showing consistent profitability, healthy cash flow, and manageable debt help demonstrate why you are a good borrower. That can put you in a stronger position to negotiate competitive rates and terms. Good reporting cannot guarantee a particular offer, but neither should a well-run business be difficult to finance simply because its financial information does not adequately reflect its performance.

Through our Client Accounting and Advisory Services, we help owners understand that performance and plan what comes next. We can model an expansion, compare the financial effects of different borrowing options, and project what the payments would mean for cash flow and owner distributions. We can also identify where margins, inventory management, or operating expenses need attention before taking on another obligation. The goal is to build a stronger business, demonstrate that strength, and understand which opportunities are actually worth pursuing.

The people who did the hard work of getting on the grid deserve to receive more of the benefits that should have come with it. As better financing options become available, I want our clients prepared to take advantage of them, with a clear understanding of what the money can accomplish. Contact us to discuss how our advisory team can help your business prepare.