Companies venturing into the cannabis industry in New Mexico are likely learning how difficult it can be to secure capital, buildings, and insurance.
Growing Forward, the collaborative podcast between NM Policy Report and New Mexico PBS, explored these topics in its latest episode.
In late May, the New Mexico chapter of NAIOP, a commercial real estate development association, hosted a panel in Albuquerque on best practices for cannabis entrepreneurs and real estate owners considering leasing space from cannabis companies.
Shannon Cox, chief compliance officer at Southwest Capital Bank, told the crowd that the bank is now wading through commercial lending waters 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 does not accept cannabis customers.
“Don’t lie to your banker because they’ll find out and they’ll kick you out,” Cox said.
Cox later told Growing Forward that Southwest Capital had been working on cannabis business loans for a while, but wanted to make sure the bank was compliant before accepting applications.
“We wanted to make sure our compliance program was of the highest quality before we started offering new services,” Cox told Growing Forward. “We feel we have a good program now. We have very experienced lending staff, which is essential, and we believe we are ready to move forward.
In a previous episode, Growing Forward heard from business owners who not only struggled to finance their business, but also to get a personal mortgage for their home. But Trishelle Kirk, CEO of Everest Cannabis Co., said she and some of her employees had been successful in getting mortgages, but it wasn’t easy.
“It’s one of the most frustrating things about being a cannabis employee,” Kirk said. “You have a W-2, you have paychecks, you have your taxes withdrawn, you do everything right. And in many ways, cannabis is much more stable than other industries like the hospitality industry, for example, over the past two years. But it can be difficult to find someone willing to take out a mortgage or refinance your home.
Kenny Byrd, panelist and vice president at insurance brokerage HUB, told Growing Forward it still feels like the “wild west” when it comes to covering cannabis businesses.
“Right now what we’re having trouble with is that the insurance market is so small for cannabis customers that the price is higher,” Byrd said. “So what we’re trying to do is help our customers by lowering prices, having more competition.”
Insurance for cannabis businesses means protecting consumer lounges and grow sites, but Byrd said it also means covering a cannabis business from product liability.
“The biggest that I think we’re going to start seeing, because now it’s not just medical, it’s rec[reational-use], this is called product liability. So I went to a cannabis store, took your product, and it made me sick or caused a reaction. And it’s not even that. This is the accusation he made. Because what if I went to a steak restaurant the night before and got food poisoning from the steak restaurant, but I also used your product that night? Well, who was it? Was it the steak or was it the cannabis product? The courts do not care if my entity is sued. The insurance should cover defense costs,” Byrd said.
Listen to the full episode below.