Companies that are venturing into the New Mexico cannabis industry are likely learning how difficult it can be to secure capital, buildings and insurance.
Growing Forward, the collaborative podcast between NM Political Report and New Mexico PBS, explored those topics in its latest episode.
In late May, New Mexico’s chapter of NAIOP, a commercial real estate development association, held a panel in Albuquerque on best practices for cannabis entrepreneurs and property owners who are thinking about leasing space to cannabis companies.
Shannon Cox, who is in charge of compliance at Southwest Capital Bank, told the crowd that the bank is now wading into the waters of commercial loans for cannabis companies. But, she warned, cannabis business owners should not try to hide the nature of their business from their bank, especially if the bank is not accepting cannabis customers.
“Don’t lie to your banker, because they’re going to find out and they’re going to kick you out,” Cox said.
Cox later told Growing Forward that Southwest Capital has been working towards cannabis business loans for some time, but wanted to make sure the bank was compliant before accepting applications.
“We wanted to make sure that our compliance program was top grade before we started offering new services,” Cox told Growing Forward. “We feel that we’ve got a good program now. We’ve got a very experienced lending staff, which is critical, and we feel that we’re ready to go forward on it.”
In a previous episode, Growing Forward heard from business owners who not only had a hard time funding their business, but also securing a personal mortgage for their home. But Trishelle Kirk, the CEO of Everest Cannabis Co., said she and some of her employees were successfully able to secure mortgages, but that it’s not easy.
“It’s one of the really frustrating things about being a cannabis employee,” Kirk said. “You have a W-2, you have paychecks, you’re getting your taxes taken out, you’re doing everything right. And in many ways, cannabis is far more stable than other industries like the hospitality industry, for example, over the last couple of years. But it can be difficult to find someone who’s willing to write a mortgage or refinance your house.”
Kenny Byrd, a panelist and a vice president at insurance brokerage firm HUB, told Growing Forward that it still feels like “the wild west” when it comes to covering cannabis businesses.
“Right now, what we’re having problems with is the insurance market is so small for cannabis clients that the price is larger,” Byrd said. “So what we’re trying to do is help our clients by getting the prices to come down, by having more competition.”
Insurance for cannabis companies means protection for consumption lounges and grow sites, but Byrd said it also means covering a cannabis business from product liability.
“The biggest one that, in my opinion, we’re going to start seeing, because now it’s not just medical, it’s rec[reational-use], is what’s called product liability. So I went to a cannabis store, I took your product, and it made me ill or it caused a reaction. And it’s not even that it did. It’s the accusation that it did. Because what if I went to a steak restaurant the night before and I got food poisoning from the steak restaurant, but then I also used that night from your product? Well, who was it? Was it the steak or was it the cannabis product? The courts don’t care if my entity gets sued. Insurance has to cover the defense cost,” Byrd said.
Listen to the entire episode below.