March 17, 2014

Since January 1, when Colorado’s marketplace for the legal sale of recreational marijuana first opened, all eyes have been on the state to see what consequences unfold. Already, early estimates are showing tax revenues from pot sales to be far exceeding expectations-from the $70 million provided to voters to $98 million recently predicted by Colorado governor John Hickenlooper for the next fiscal year. 

Until recently, processing money from marijuana sales put federally insured banks at risk of drug racketeering charges. But just weeks ago, the Obama administration gave the “ok” for banks to lend to pot sellers, at least with a complicated list of due diligence requirements and over 20 red flags that must be reported to ensure business legitimacy and compliance with federal law. FinCEN, the Treasury Department’s Financial Crimes Enforcement Network, has a vested interest in helping to keep cash off the streets since it writes the rules that banks follow to mitigate money laundering and the financing of terrorism.

Yet many banks are reading the new guidelines as more of an outline to all the risks of doing business with pot sellers than a green light. The American Bankers Association says the new regulations simply aren’t enough, since they don’t change the fact that marijuana sales are still illegal under federal law. That means property used as collateral for loans would potentially be subject to federal drug-seizure laws. According to The Denver Post, Colorado’s two largest banks, Wells Fargo Bank and FirstBank, aren’t offering new loans to landowners with pre-existing leases with pot businesses.

You don’t have to be selling marijuana to run into obstacles with a financial institution, particularly when it comes to getting a loan or line of credit. If you’re seeking to obtain financing for cash flow and daily operations, growth plans or other needs, Talley & Company’s team and relationships with lending institutions can help. Our advisors can present and prepare your company’s financials in ways that increase favorability with lenders, helping to make sure your efforts don’t go up in smoke.