Marijuana-Related Business is generally rated or designated as “high-risk” by financial institutions. Part of the hesitancy around accepting or working with MRBs is because the product (cannabis or marijuana) is still considered illegal by the federal government.
Despite the legal kerfuffle, the business is still going on, with state-level legalization and medical-use exceptions. By 2025, legal sales will reach 20 Billion in the US. Even now, there are already more than 13,000 Marijuana-Related Business ventures despite all the challenges and drawbacks. Despite the financial and legal roadblocks that MRBs have faced, the benefits outweigh the negative side-effects.
Financial institutions may oversimplify Marijuana-Related Businesses (MRBs) by viewing them as an entity that has a direct connection with the product. That would include anyone who cultivates marijuana as well as processors, packagers, and anyone related to the transportation and dispensary of the product.
While this view may cover many of the individuals who are involved in the MRB process, the tiered approach allows financial institutions to better classify MRB, while better determining the risk factors involved. Here’s a quick overview of the three tiers of MRBs.
The Tier-1 MRBs are considered the most high-risk business ventures because it involves the most direct interaction with the product. These MRBs include, but are not limited to Planting, Cultivation, Harvesting, Processing, Testing, Packaging, Transportation, and other related categories. These activities are typically licensed by state entities, but they also face more stringent compliance standards.
The Tier-II MRBs are typically supporting entities or businesses. These businesses may work directly with Tier-1 MRBs without directly interacting with the product, so they are medium risk. Tier-II MRBs would include packaging suppliers, associations, hydroponic suppliers, or even software providers. It can also include payment processors, consulting, advertising, and public relations.
The Tier-III MRBs are further removed from the product, so they are considered an incidental business, with the lowest risk designation by financial institutions. This categorization can be somewhat vague and open to interpretation, but the Tier-III MRBs typically include accountants, lawyers, property owners, and other related incidental business ventures.
It’s important for MRBs to understand the risk assessment that will affect their ability to get a loan for start-up or other business expenses. The tiers further delineate the complexities of running an MRB, including the importance of finding a financial partner who understands the process and ensures compliance protocols.
The tiers are not only essential as a risk-assessment categorization but also to determine what additional compliance and review protocol may need to be implemented. Beyond the applicable registration and licensing, the process of collecting documents could seem daunting to any MRB.
While MRBs are becoming more widely accepted by financial institutions, it’s still important to find a lender who understands your unique challenges. CannaBusiness Financing can help cannabis businesses secure loans—not only do we know the industry, but we have extensive experience helping businesses get the funding they need to grow.
We know how hard it can be to secure business finances in the cannabis industry. That’s why we’re here, to help you achieve your financial goals while making the process as streamlined and simple as possible. Contact us today to learn more about funding options for your MRB and get pre-approved in 48 hours. Whether you’re looking for a loan to cover real estate, equipment, working capital, or all of the above we can help no matter which MRB tier you're in.
Posted by Canna Business TeamFacebook
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