Closing Deals In The Face of Federal Laws and Restrictions
While many states are legalizing cannabis to varying degrees, lack of federal legalization can make it difficult for businesses in this sector to get loans, credit, and certain types of insurance.
Many lenders are reluctant to extend credit to cannabis businesses, fearing they may never recoup their loans if the industry is subject to a federal crackdown.
For companies that want to buy real estate, most title underwriters won’t insure the deal for the same reason. If the property is confiscated by the federal government, owners and lenders would lose their investment without insurance. In addition, if a bank loaned money for a mortgage for any sort of cannabis operation and the buyer defaulted, a state court might not enforce the mortgage.
This is a rapidly changing situation on both state and federal levels, and doors are opening for cannabis owners and operators, with some banks now lending and some title insurers underwriting policies. We’re regularly researching and staying abreast of available options.
If you have any questions about cannabis deals or other title challenges, or if you would like to discuss an upcoming or potential transaction, please contact us.