When it becomes legal to sell recreational marijuana in California, developers are going to need money but thanks to federal regulations, they will not be able to get it from a bank. They are going to have no choice but to borrow from California Hard Money Lenders.

Some people have been touting the benefits of legalizing marijuana for years. They have gone on at length about the impact on the courts and jails and the boost it can give the economy. With the passing of Proposition 64 in California, residents of the Golden State will soon realize those benefits.

Thanks to federal regulations, the banks will not be seeing as much (if any) of that financial boost. Instead, the beneficiary will be the California Hard Money Lenders that will be ready willing and waiting to do business.

What Regulations?

Many states, like California, have been passing state laws to legalize marijuana, but the federal statute remains. As far as the Feds are concerned, marijuana is still an illegal drug and is listed by the DEA as a Schedule 1 controlled substance. But the Department of Justice has not been prosecuting cases in states that have legalized marijuana.

So—on a criminal level, federal authorities have been backing off. But on a financial level, the federal government has been doing a little flexing of their muscles. Businesses need money to get off the ground, but federally insured banks will not approve loans for marijuana-related businesses. Nor will they allow marijuana businesses to set up accounts.

“It continues to be an issue because banks are regulated at the federal level,” Taylor West, deputy director of the National Cannabis Industry Association, said in an article in the Scotsman Guide. “Some businesses have been able to get bank accounts through one means or another, but as an industrywide situation, it is still pretty much a problem.”

This, of course, makes California Hard Money Lenders the No. 1 option for anyone thinking of opening a marijuana dispensary. However, there is an option.

The Financial Crimes Enforcement Network

If a bank wants to be approved by the Department of Treasury to provide loans to the marijuana industry, they have to abide by the rules as set forth by the Financial Crimes Enforcement Network. The network enforces the regulations outlined in the Bank Secrecy Act which essentially requires a bank to investigate potential lenders as much as possible and to not do business on purpose or by accident with “bad actors.”

For now, even though they are legal according to the states, marijuana businesses are considered the bad actors. Violators stand to risk being fined, but new regulations have opened the door to allow banks to do business with marijuana-related businesses. But there are stipulations. They can do so as long as they investigate the company and the parties involved as completely as possible. They will also have to continue to monitor clients after approving a loan for any potential wrong doing.

Banks do not want to go through all that hence the door being wide open for California Hard Money Lenders to be real busy in the near future.

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
 
About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.