Banking & Cannabis Financing for Marijuana MSOs

As more states legalize medicinal and recreational marijuana, there is an opportunity for cannabis companies to expand beyond their own state borders. Brands that already have multiple state subsidiaries can use this opportunity to seek cannabis financing for expansion.

What Are Marijuana Multi-State Operators?

In the cannabis business, multi-state operators (MSOs) are companies that operate in multiple states but keep each state’s subsidiary operations separate from the others. Because marijuana is still illegal at the federal level, these companies are not allowed to grow or produce products in one state and sell them in others. Those sales would violate federal interstate commerce laws.

Legal and regulatory headwinds have not stopped some marijuana brands from expanding their operations and becoming MSOs. To be successful, they must operate with quality and efficiency in each state and have the ability to secure financing in each state as the need arises.

Pros of Being an MSO

There are several advantages of being a marijuana MSO, including:

  • Brand recognition across multiple states
  • Strong customer bases and marketing campaigns that can be combined or used as models for future expansion
  • A head start on the work needed to merge their operations if federal laws change
  • Preparation of the steps needed to meet the financial costs of merging their state operations

Cons of Being an MSO

Despite the growth of the multi-state model in the cannabis industry, there are some obstacles that marijuana MSOs have to face, such as:

  • Having to comply with inconsistent state laws and regulations, making it difficult to optimize processes across the company
  • Difficulty in maintaining product consistency due to the difference in growing conditions in various states
  • Finding investors willing to take a chance on a brand with multiple state operators and complicated operational and financial structures

Banking and Cannabis Financing Tips for MSOs

It is difficult for any company in the cannabis business to find banks willing to provide them with traditional banking services and cannabis financing. Complicated federal laws and regulations make it very hard for banks to provide these services without putting their own businesses at risk.

Marijuana MSOs face the additional problem that it is difficult for traditional banks to conduct their usual due diligence before offering them loans or other financial services. MSOs have complicated corporate structures, as do their subsidiaries in each state. Each of those states has its own banking laws.

These are obstacles that most banks are unwilling, or unable, to overcome.

In order to tackle these challenges and comply with state and federal laws, marijuana MSOs should open bank accounts in each state in which they operate if at all possible. They should do so with the same bank in each state if that is an option in order to build a strong relationship and trust.

Marijuana MSOs should also look into various financing and lending solutions such as those offered by Bespoke Financial. Bespoke offers several types of financing along with revolving lines of credit and flexible repayment terms to help companies expand their brands into additional states or to help finance their existing marijuana MSO.

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