The state of Maryland has made millions of dollars since they launched adult-use cannabis sales in July of 2023. As such, a growing number of people are trying to get in on the action and open their own canna-businesses. One major hurdle they are facing: startup costs. Starting any business is expensive, but in this industry, it can be prohibitively so. But fear not, we’ve compiled a detailed guide to help you learn more about obtaining cannabis business loans and grants in Maryland. Let’s take a closer look.
An overview of Maryland’s cannabis market
Maryland has made some major strides in reforming statewide cannabis laws over the last decade. Prior to medical legalization in 2014, Maryland had one of the highest cannabis-possession arrest rates in the nation.
According to data from the American Civil Liberties Union (ACLU), cannabis possession accounted for almost 50% of all drugs arrests before legalization. Additionally, the state spent roughly $110 million annually enforcing marijuana laws when it was illegal. This was the third highest amount in the United States.
HB 881
It was a breath of fresh air when House Bill 881 passed to permit the medical use of cannabis. The bill established the Maryland Medical Cannabis Commission (MMCC) and implemented new regulations for cultivation, processing, possession, and sales.
HB 881 also made possession of cannabis without a medical license only a civil infraction. Before that it was a criminal misdemeanor to be caught with any amount under a certain weight.
HB 556 and SB 516
The lax new laws gave way to the development of an adult-use market, which was approved in November of 2022 with the passage of two bills: House Bill 556 and Senate Bill 516, known cumulatively as the Maryland Cannabis Reform Act (fully signed into law the following spring). Sales began July 1st of 2023.
Since launching, Maryland’s recreational market has seen month-over-month increases and wrapped up 2023 with $331.8 million in sales (total cannabis sales for the 2023 calendar year were $796.3 million). Between July and September of 2023, Maryland collected $12.2 million in taxes from adult-use cannabis sales.
According to the Maryland Cannabis Administration (MCA), this growth has come at the expense of the state’s medical market, which has been on a steady decline during the second half of 2023. However, this is relatively normal in most states where cannabis is legalized recreationally, as it’s simply easier not having to obtain and renew a medical recommendation every year.
A bit about banking in the industry
Banking has always been a struggle for cannabis industry operators. Banks and credit unions have largely avoided serving cannabis businesses because of the legal limbo between federal and state laws. Cannabis is illegal under federal law, but 38 states have legalized it for medical use and 24 states have established adult-use markets.
Any financial institution that lends to, finances or holds money for a canna-business could face steep federal penalties. This is true even in states that have legalized the plant. Advocates have been trying to pass the SAFE Banking Act (Secure and Fair Enforcement Banking Act) for the past 5 years now, but it keeps getting sent back for revisions so it’s undetermined if and when it will be passed.
And because cannabis businesses cannot get loans via traditional means, they have to look alternatively. This is why there is such a great need for independent lenders in the industry. Now let’s discuss Maryland’s cannabis business loans and grants.
Maryland Cannabis Loans vs Grants
Both loans and grants are funding options for someone looking to start a business; the main difference between the two is repayment. Loans require repayment, and typically with interest although rates can vary significantly, and grants do not.
Grants are basically gifts awarded by federal or state government departments, universities or colleges, corporations, nonprofit organizations, or trusts. The Maryland cannabis grants can be awarded based on need, and are given to individuals or businesses who meet certain criteria.
Loans for Maryland cannabis businesses are given by banks and other financial institutions, including private lenders, and the borrower is required to pay back the money while adhering to certain term limits, mainly paying a minimum agreed-upon amount each month, which includes interest, and paying the loan back by a specific date.
Getting technical: Licensing, loans, and grants for Maryland cannabis businesses
Let’s take a closer look at cannabis business licensing, as well as a few options for different Maryland cannabis loans.
Cannabis licensing categories
Maryland breaks down their cannabis licensing into four main categories: cultivation, processing, lab testing, and dispensary licenses. Each has different requirements and application fees. By the end of this year, the state plans to disperse the following cannabis business licenses:
- 75 Standard Dispensaries
- 16 Standard Growers
- 32 Standard Processors
- 24 Micro Growers
- 24 Micro Processors
- 8 Micro Dispensaries
As of late 2023, there were only three licensed testing facilities in the state, but this sector is growing like the rest of the market.
Different types of cannabis business loans in Maryland
Marijuana businesses can choose from a few different Maryland cannabis business loan options. Some of these include:
- Working Capital Loans: These loans are designed to help business owners cover their day-to-day spending until the company begins to show profit. Some approved expenses for this type of loan include payroll, rent, inventory, and utility bills. Working capital loans are great for keeping money flowing when unexpected costs arise.
- Equipment Financing: These Maryland cannabis loans provide financing for companies strictly for the purchase of whatever necessary equipment they need to start a business. This can include equipment for cultivation, processing, packaging, and more. Equipment and supplies are typically one of the largest upfront costs for cannabis startups.
- Accounts Receivable/Invoice Financing: AR and invoice lines of credit allow businesses to use their outstanding invoices or accounts receivable as collateral to get quick access to cash. Late payment on invoices has been an ongoing problem in the cannabis industry, so this is a good way for business owners to stay afloat while they wait on payments to come in.
- Real Estate Financing: Perfect for Maryland cannabis companies who want to grow their business and invest in new facilities. Real estate loans allow businesses to purchase or refinance properties for manufacturing, cultivation, distribution, and retail purposes.
- Other: While the above loans are more common, some lenders will offer financing for more specific needs, such as dispensary loans and vendor financing.
While it can be challenging to get approved for a Maryland cannabis business loan, they offer attractive interest rates and competitive terms for long-term financing. Eligibility, loan amount, interest rates, repayment terms, and collateral requirements will vary based on the type of loan you’re applying for and your individual financial situation.
Lenders to consider for Maryland Cannabis Loans
Maryland’s cannabis industry is still in its infancy, having only officially started last summer. So there aren’t a lot of companies yet that offer loans or other types of financing to cannabis entrepreneurs. Luckily, there are few, and more to come as the industry continues to grow.
A few Maryland cannabis lenders worth mentioning are:
FundCanna: According to their website, FundCanna can get you approved, with money in hand, in as little as 24 hours. Additionally, they have provided over $20 billion to small and medium businesses nationwide since their inception. The company is based in California but works in all legal states and has recently expanded into Maryland.
CFG Bank: CFG Bank (CFGB) recently announced its expansion into the cannabis market (including Maryland), making it one of the only actual banks in the area to serve industry clients. They have already worked with a few big names including SunMed Growers and Curio Wellness.
Safe Harbor Financial: Safe Harbor started in Colorado back in 2015. Since then, they have processed over $12 billion in cannabis transactions across the 20 states in which they operate. They recently announced their entry into the Maryland market as well.
What about Maryland Cannabis Grants?
Cannabis Grants in Maryland are a bit more challenging to come by, as they are limited in availability. In Maryland, eligible parties can apply for the Cannabis Business Assistance Fund (CBAF) through the Department of Commerce.
CBAF was established to offer funding to small businesses including minority-owned and women-owned businesses entering the adult use cannabis industry. Additionally, CBAF offers grants to Historically Black Colleges and Universities (HBCUs) for cannabis-related academic programs. They also provide funding to business development organizations that help train and assist small companies.
Closing Remarks on Maryland Cannabis Loans and Grants
Knowing where to start in a new industry comes with many challenges, but our goal is to make the learning process a bit easier for you. Remember to continue doing your own due diligence so you can find a lender that is best for you, create a compelling Maryland cannabis loan application, and wait for the money to roll in. However, if you’d like assistance with finding the best Maryland cannabis loan or grant for you, schedule a call with our Maryland cannabis consultants to learn how we can make your life easier. We can help guide your through the process of obtaining financing for your cannabis business in Maryland, while doing all the heavy lifting for you.
