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.