As of the recent 2020 election, recreational marijuana use has now been legalized in fifteen states, while medical marijuana use is now allowed in 35 states. Despite this increase in legalization, there are still many financial obstacles for the marijuana industry to overcome. In Colorado, hard money lenders have stepped up to help bridge the lending gap that has occurred as banks refuse to finance new loans or force immediate repayment of existing loans when a marijuana tenant is involved. Other conventional financing resources such as SBA or USDA loans that are typically available for business owners wanting to build or improve their facilities are also unavailable.

Private lenders have recognized that this is a beneficial scenario for all involved—lenders, investors, business owners, and landlords. Private lenders have been offering hard money loans (asset-based financing). While private loans are typically short-term loans, lenders are willing to work with borrowers who might need longer term financing through renewal options for short-term hard money loans (the available options will vary from lender to lender). Such loans typically require a 40 percent down payment, depending on the property’s value, but can be financed in as little as four weeks with the proper paperwork. The other advantage for hard money borrowers is that if the space needs improvements to become an ideal space for a marijuana tenant, then it may be possible to have funds to cover the costs of such improvements included in the loan amount. This way the borrower doesn’t have to pay for all of the improvements out of pocket before securing a tenant to rent the improved space.

The other financial obstacle for marijuana tenants in the Denver metro area is that rent for marijuana-zoned spaces has skyrocketed as has the cost to purchase warehouse properties to rent to marijuana tenants. In fact, the Wall Street Journal reports that the cost to purchase warehouse facilities in Colorado has doubled since January 2014. For investors looking to get in on this market, the question becomes how long can the market support such price inflation. Already, marijuana tenants have begun looking outside the warehouse box for other facilities that can be used for growing their product.

Montegra offers marijuana property loans to landlords who will be renting warehouse properties or dispensary spaces to marijuana tenants. For more information about our marijuana-tenanted loan programs, contact us at 303-377-4181.