By Greg Miller, Executive Director, National Institute of Cannabis Investors
Right now, most banks won’t work with cannabis businesses because marijuana is illegal under federal law. Financial firms don’t want to be accused of facilitating an “illicit” transaction.
Unfortunately, that means a U.S. cannabis entrepreneur can’t get a loan. Heck, some cannabis companies couldn’t even open a bank account a few years ago.
Today, the banking industry is finally starting to warm up to marijuana businesses.
Safer Harbor Private Banking, a division of the Partner Colorado credit union, allowed cannabis firms to deposit $931 million in 2017, according to The New York Times.
Severn Bancorp Inc. (Nasdaq: SVBI) out of Maryland works with medical cannabis firms, and there are other banks and credit unions who work with marijuana businesses, but they are just more discreet.
But here’s the thing…
There’s a story playing out in the U.S. right now, and I’m excited for what I see in the next chapters. The marijuana market will mature and grow, and financial firms will be a big reason why that happens.
And if you know what to watch for now, you will be just that much more ahead of other cannabis investors. You don’t get rich from what happened in the past. You make the most money by being ahead of the curve.
When bankers finally open their doors to cannabis entrepreneurs, it’s going to be huge for your investment portfolio…
Banking Turns Cannabis Legitimate
Right now, we are in what I like to call the “Land Rush” stage for cannabis.
When the chance to plant a flag is gone, it’s gone.
But the next part of the story is where things really get interesting, and banking plays a huge part. It’s what I like to call the “Settlement” stage.
One of the attributes of this “settlement” stage will be that banking services won’t just be available to cannabis companies – those services will be easy to get and provided at fair prices.
I can’t say what is going to happen or give you an exact date of when it could happen. No one can be sure.
It could come as part of the STATES Act, allowing cannabis companies to operate in legalized states without fear of federal interference. It might be a separate bill making it clear that banks are not violating any regulations when they bank cannabis companies in compliance with state laws. Or it could be the Big Event – the descheduling of marijuana as a Schedule I drug under the Controlled Substances Act and the full U.S. legalization of all cannabis use.
The point is, something will happen, and maybe as early as this year. And when it does it, there will be an instant increase in the profitability. It will allow the cannabis industry to grow even faster.
Another consequence of normalizing banking is that more major banks will underwrite cannabis IPOs and advise cannabis startups on going public. Part of the underwriting process involves drumming up interest and attracting investors.
The bigger the banker, the more connections they have. That can be the difference between a stock being priced at $12 per share and $15 per share.
We’ll also see those banks bring innovative financing solutions to cannabis companies the same way they do for other companies. We’re already seeing this start with the emergence of convertible bonds in the cannabis market, something I wrote about on Monday.
Finally, we will see some serious money enter the market thanks to retirement account managers, as there will be fewer objections to adding cannabis stocks to portfolios.
If cannabis stocks are good enough for banks to underwrite, then they will be good enough for retirement managers to buy.
As of September 30, 2017, the largest 1,000 U.S. retirement plans reached $10.32 trillion of total assets, according to Pensions & Investments.
If even just 1% of that money flows into cannabis stocks, that’s $103 billion. If you have the right cannabis portfolio now, that will be a huge boost to your investments.
Again, the story is still playing out.
But hopefully I was able to make it more clear today why I’m watching the banking industry with a lot of excitement. [Full story]
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