Emerging Markets: Cannabis

In our ever-changing world, we not only see the adaptation of existing industries, but the emergence of new, extremely prevalent ones. There have been major strides made over the past few years regarding the legalization of cannabis, opening up individuals to a myriad of new business opportunities such as cannabis growth, retail, distribution, insurance, and financing. At the dawn of the new market of legal recreational marijuana use, starting a grow facility or dispensary has never been more lucrative as this nearly $14 billion industry continues to grow.

The Growing Cannabis Industry

            As of 2019, the cannabis industry has been estimated at roughly $13.6 billion, and is expected to grow to upwards of $85 billion in 2030. This drastic increase in the cannabis industry comes as a result of a growing acceptance toward marijuana, as well as reforms that are progressively easing more and more regulations off of the industry.

            Much of the current cannabis industry grow is derived from the accelerated growth of the CBD industry after the Marihuana Tax Act was passed, which is now slowly being eased off the industry. CBD oils, rubs, “gummies,” and other products have made a huge resurgence in recent years and continues to grow at an accelerated rate. In 2018, the CBD industry was valued at roughly $390 million, but is expected to grow to $1.3 billion in 2022, some even expecting a growth to $22 billion in 2022.

"We are a team of highly conservative analysts and we did not take this lightly - I honestly believe that these are conservative numbers. We have no rose-colored glasses in terms of the bizarre and challenging regulatory framework that surrounds this industry, it will always be two steps forward, one step back. There are sure to be some problematic regulations and bumps along the way. But there is too much momentum, too much demand and too much potential for this industry not to explode."

-       Bethany Gomez   Brightfield Managing Director

FDA CBD and Cannabis Regulation

            Under federal regulations, it is technically illegal to market food products or dietary supplements that contain CBD, but the FDA indicated that may change in the future. In December 2018, the FDA released a press release after the Farm Bill, legalizing the regulated production of hemp, another source of CBD, was passed.

"Although such products are generally prohibited to be introduced in interstate commerce, the FDA has the authority to issue a regulation allowing the use of a pharmaceutical ingredient in a food or dietary supplement. We are taking new steps to evaluate whether we should pursue such a process."

        This is great news for many companies betting on the compound and dealing with its murky legal status, but investors cannot yet expect CBD to be placed as unscheduled altogether. CBD cannot yet be unscheduled altogether because of international treaties the U.S. has signed, but with the Biden administration we can expect to see some potential changes in these regulations and scheduling adversities.

Cannabis Funding

            Cannabis companies raised an aggregate of $116.8 billion in capital in 2019, and expect to raise even more in the future, but the main concern around this is the US focus on banking reform surrounding the industry. Big banks are currently afraid of the potential money laundering liabilities that it may face as a result of working with businesses in the cannabis industry. This proves to be a major inconvenience for cannabis companies who operate primarily in cash. Therefore, these businesses turn to smaller, private, lenders to offer them financing on capital equipment and other business expenses at a low rate so that they can keep as much cash on hand as possible for business operations.

US Capital Solutions has been in the private lending business for over 25 years and has financed millions of dollars in cannabis growth and dispensary equipment. From racks and lights to warehouses and greenhouses, we can fund anything. Fill out our free and easy credit application to see what rates you qualify for. Contact one of our knowledgable Account Executives to get a free consultation and lending advice.