Katelyn Baker
Well-Known Member
Chicago – It should be a routine call, scheduling a visit from the cable guy to set up internet access. But nothing's routine when you're running a medical marijuana company.
"There's this flurry of activity that starts with the account manager with a headset on in a cubical," said Jeremy Unruh, general counsel and compliance chief at PharmaCann, which operates two cannabis cultivation centers and four dispensaries in Illinois. "'Can we do it? Can we not do it? How do we contract with a marijuana company?'"
Unruh has grown used to the uncertainty, the "let me ask my manager" responses. The cable company ended up working with PharmaCann, but Unruh said the extra steps it took are an illustration of what it's like building a new industry, one that used to have to operate in the shadows.
"Engaging in normal business activities is made that much more complicated by the subject matter of what we do for a living," he said.
State lawmakers approved Illinois' pilot medical cannabis program in 2013, and dispensaries started opening two years later. Despite generating more than $42 million in retail sales so far, the nascent industry in Illinois is going through more than the normal growing pains of new companies. It's marijuana, after all, and entrepreneurs are learning just how hard it is to shake off the stigma attached to a substance the federal government puts in the same class as heroin and LSD.
Illinois companies also are grappling with slower-than-expected growth of patient numbers, so while they wait for demand to increase here, they are eyeing other states for expansion.
And beyond all those nuts and bolts is the overarching fear the new administration will nullify the industry's progress. President Donald Trump showed support for medical marijuana on the campaign trail, but Jeff Sessions, Trump's attorney general, has criticized the drug's legalization, saying he won't commit to disregarding federal law.
The challenges begin where they do for any startup: with capital.
The U.S. Department of Treasury has given banks the green light to work with legal marijuana entities under some conditions, but most lenders still hesitate. Elected officials, including Illinois State Treasurer Michael Frerichs and a group of U.S. senators led by Massachusetts Democrat Elizabeth Warren, are pushing to make it easier for banks to work with companies in the $7 billion industry.
In Illinois, there are just a few banks willing to take on medical marijuana companies as customers, which means no ready access to lines of credit or loans. One bank that medical cannabis business owners said they work with declined to confirm on the record that it operates in the industry. Another did not return requests for comment.
Entrepreneurs frequently find themselves looking elsewhere for their financial lifelines.
The founders of Cresco Labs, which operates three cultivation facilities in Illinois, first tapped friends and family for startup funds, and then other investors. A bank loan helped Cresco secure and construct its facilities.
"A lot of companies use lines of credit to smooth out cash flow," said Charlie Bachtell, Cresco's CEO and co-founder. But in the medical cannabis industry, companies need "to have cash in the bank," he said.
Most dispensaries cannot accept credit card payments from customers, and all that cash on hand can tempt criminals. A bank account also lets companies write checks to vendors, and employees receive paychecks instead of envelopes stuffed with cash.
But those little victories come at a cost. Banks pass along the cost of the extra compliance work it takes to do business with companies in the space – like paperwork to prove money isn't being laundered.
A bank told New Age Care in Mt. Prospect, Illinois, last May that its monthly servicing fees were going to almost double to $600, a sum that pushed the dispensary to drop day-to-day banking operations and start dealing mainly in cash or money orders, said co-owner David Knapp. The company hired a security firm to transport funds, adding another expense to its accounts payable ledger.
Rule No. 1 in the medical marijuana business, Knapp said: Always have a backup plan.
Finding a property to house a dispensary can be a search of needle-in-a-haystack proportions. State laws mandate that dispensaries must be 1,000 feet from the property lines of schools or day care homes, for example. And good luck finding a landlord willing to work with a cannabis company, said Knapp at New Age Care.
"It was almost like dating again," he said. "There was just a ton of rejection."
Things change constantly as the industry grows and works to become established, but one thing is for sure, Knapp said.
"It's been a wild ride."
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: In Illinois, Medical Marijuana Companies Battle Growing Pains
Author: Ally Marotti
Contact: 541-382-1811
Photo Credit: Getty Images
Website: The Bulletin
"There's this flurry of activity that starts with the account manager with a headset on in a cubical," said Jeremy Unruh, general counsel and compliance chief at PharmaCann, which operates two cannabis cultivation centers and four dispensaries in Illinois. "'Can we do it? Can we not do it? How do we contract with a marijuana company?'"
Unruh has grown used to the uncertainty, the "let me ask my manager" responses. The cable company ended up working with PharmaCann, but Unruh said the extra steps it took are an illustration of what it's like building a new industry, one that used to have to operate in the shadows.
"Engaging in normal business activities is made that much more complicated by the subject matter of what we do for a living," he said.
State lawmakers approved Illinois' pilot medical cannabis program in 2013, and dispensaries started opening two years later. Despite generating more than $42 million in retail sales so far, the nascent industry in Illinois is going through more than the normal growing pains of new companies. It's marijuana, after all, and entrepreneurs are learning just how hard it is to shake off the stigma attached to a substance the federal government puts in the same class as heroin and LSD.
Illinois companies also are grappling with slower-than-expected growth of patient numbers, so while they wait for demand to increase here, they are eyeing other states for expansion.
And beyond all those nuts and bolts is the overarching fear the new administration will nullify the industry's progress. President Donald Trump showed support for medical marijuana on the campaign trail, but Jeff Sessions, Trump's attorney general, has criticized the drug's legalization, saying he won't commit to disregarding federal law.
The challenges begin where they do for any startup: with capital.
The U.S. Department of Treasury has given banks the green light to work with legal marijuana entities under some conditions, but most lenders still hesitate. Elected officials, including Illinois State Treasurer Michael Frerichs and a group of U.S. senators led by Massachusetts Democrat Elizabeth Warren, are pushing to make it easier for banks to work with companies in the $7 billion industry.
In Illinois, there are just a few banks willing to take on medical marijuana companies as customers, which means no ready access to lines of credit or loans. One bank that medical cannabis business owners said they work with declined to confirm on the record that it operates in the industry. Another did not return requests for comment.
Entrepreneurs frequently find themselves looking elsewhere for their financial lifelines.
The founders of Cresco Labs, which operates three cultivation facilities in Illinois, first tapped friends and family for startup funds, and then other investors. A bank loan helped Cresco secure and construct its facilities.
"A lot of companies use lines of credit to smooth out cash flow," said Charlie Bachtell, Cresco's CEO and co-founder. But in the medical cannabis industry, companies need "to have cash in the bank," he said.
Most dispensaries cannot accept credit card payments from customers, and all that cash on hand can tempt criminals. A bank account also lets companies write checks to vendors, and employees receive paychecks instead of envelopes stuffed with cash.
But those little victories come at a cost. Banks pass along the cost of the extra compliance work it takes to do business with companies in the space – like paperwork to prove money isn't being laundered.
A bank told New Age Care in Mt. Prospect, Illinois, last May that its monthly servicing fees were going to almost double to $600, a sum that pushed the dispensary to drop day-to-day banking operations and start dealing mainly in cash or money orders, said co-owner David Knapp. The company hired a security firm to transport funds, adding another expense to its accounts payable ledger.
Rule No. 1 in the medical marijuana business, Knapp said: Always have a backup plan.
Finding a property to house a dispensary can be a search of needle-in-a-haystack proportions. State laws mandate that dispensaries must be 1,000 feet from the property lines of schools or day care homes, for example. And good luck finding a landlord willing to work with a cannabis company, said Knapp at New Age Care.
"It was almost like dating again," he said. "There was just a ton of rejection."
Things change constantly as the industry grows and works to become established, but one thing is for sure, Knapp said.
"It's been a wild ride."
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: In Illinois, Medical Marijuana Companies Battle Growing Pains
Author: Ally Marotti
Contact: 541-382-1811
Photo Credit: Getty Images
Website: The Bulletin
