Entrepreneurs starting or scaling up cannabis businesses in Michigan face a tricky problem: with marijuana illegal at the federal level, they can’t borrow from traditional lenders.
Larry Magnesen, chief marketing officer at Fifth Third Bank, said his employer — one of the largest bank chains in West Michigan — does not lend to the cannabis industry.
“Handling any proceeds or conducting any business with marijuana-related businesses remains illegal under federal law,” he said.
“We have a policy called the ‘prohibited and high-risk policy,’ and marijuana is on the prohibited list.”
Private debt lenders and investors are the next logical step for borrowers — but the angel investors and lenders who are amenable to working with “cannabusiness,” as it’s often called, do not want their names publicly revealed.
Eric Seifert, founder and principal at consulting firm Left Coast Capital, said entrepreneurs have to work around that by being well-connected.
“A lot of the success in the industry is networking,” he said. “Most people already in the industry will share information, even with competitors, other than what is their secret sauce. There’s a lot of camaraderie, and more events being promoted all the time that foster that networking.”
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