The nascent New Mexico cannabis industry is generally expected to contribute tens of millions of dollars to state revenue this year, but some new cannabis businesses are learning firsthand how hard it can be to raise enough capital to operate. 

This week’s episode of Growing Forward, the collaborative cannabis podcast between NM Political Report and New Mexico PBS, examines the financial difficulties cannabis businesses face and a state program that aims to help alleviate those difficulties. 

Mathew Muñoz, the chief innovation and finance officer for cannabis microbusiness Carver Family Farm, said he and his two business partners were able to raise about $350,000 from private investors but that all three partners also contributed a large portion of their personal savings. That’s because, Muñoz said, “there’s absolutely no traditional funding in this environment.” 

“You can’t go to a bank,” Muñoz said. “Even though we have a cannabis bank, they don’t do any type of lending to cannabis businesses.”

And it’s not just businesses that sell cannabis that have felt the impacts of a lack of traditional funding. Barry Dungan, the cofounder of cannabis testing lab Rio Grande Analytics, told Growing Forward that he was unable to secure a mortgage on his home despite the fact that his business does not sell cannabis products and the process of testing cannabis renders it essentially useless. Dungan said he, like many others, had to turn to a less traditional way of financing his home, which came with “a much higher rate” than traditional lenders generally charge. 

“Because of the federal designation, banks don’t want to mess with it,” Dungan said. 

Over the past several years, a common refrain from politicians and representatives of the cannabis industry is that because cannabis is federally illegal, many traditional banks will not open accounts for cannabis businesses and none of them will issue loans to cannabis businesses. 

But Lonnie Talbert, a former Bernalillo County Commissioner and current division director of specialty banking with First Federal Bank in Jacksonville, said the reason banks generally won’t associate with cannabis businesses is not quite as straightforward as the legal status of cannabis. 

“The amount of misinformation and disinformation that is out there regarding the ability to bank cannabis customers and cannabis businesses is more than the correct information that’s out there,” Talbert said.

Talbert said the risk of a cannabis business having its assets seized by the federal government is too high for banks to consider issuing a loan. 

“In lending, if you make a loan and that loan goes bad or that loan is seized or something, that property is seized, the bank is forced to classify that asset immediately, which could have a very negative impact, depending on the size of the bank’s capital,” Talbert said.

But last year, the head of the state’s licensing department, which oversees the New Mexico Cannabis Control Division, asked the New Mexico Finance Authority about ways the state could financially help cannabis businesses that are licensed to grow up to 200 plants. 

The finance authority’s CEO, Marquita Russel, told Growing Forward that the genesis of the state’s newly approved Cannabis Microbusiness Program was when she was approached by Regulation and Licensing Superintendent Linda Trujillo to find a way to meet statutory requirements that the Cannabis Control Division address equity and equality in the cannabis industry. The program includes $5 million dollars for loans up to $250,000 designed to help licensed cannabis microbusinesses with operating expenses. 

Russel said the program fits within the finance authority’s overall mission. 

“These are at its very core, underserved businesses,” Russel said. “They’re startups, and they are, in fact, underbanked. The banks aren’t serving them. So by its very nature, this is part of our mission, which is helping underserved communities, underserved populations and underserved businesses access capital.”

Russel said the requirements for the loan program are somewhat rigorous in order to better ensure the businesses don’t default, forcing the authority to sell off a business’ assets.  

“We understand that at the time you make a loan, the collateral may have a certain value, and when you go to collect on a loan, it may have a different value,” Russel said. “So we are really very much focused on how they’re going to generate revenue and whether they understand kind of the ins and outs of the specific industry, which will cause fluctuations in their revenue streams.”

Listen to the entire episode of Growing Forward below.