Lending to the Cannabis Industry: Developing Your Institution’s Strategic Plan

12-10-2024 1:00 PM EST

Is cannabis banking a good opportunity for your bank or a risk it's not worth taking? Regulatory compliance burdens and industry-specific risks must be weighed against retaining low-cost deposits, increasing fee income, and developing profitable new borrowers. Cannabis businesses may have potential, but you must evaluate them like any other new business. Educate yourself about the cannabis industry, develop your business strategy, and win over the Board with a compelling business case. The webinar's presenter, Stacy Litke, is a former community banker who now educates her former colleagues about the pros and cons of cannabis lending. She assists financial institutions in finding a lending niche in the highly regulated and fledgling cannabis industry that aligns with their strategic goals and adheres to all regulatory and legal requirements.

What You’ll Learn:

During this informative webinar, Ms. Litke will discuss:

• The strategic alignment of your bank’s lending program with the cannabis industry
• The operation and structure of cannabis industry businesses
• Characteristics of the cannabis industry which need to be considered before you lend to these businesses
• How to go about evaluating your institution’s risk exposure
• Finding your strategic cannabis lending niche
• Lending product options and types of loans prevalent and emerging in the industry
• Potential related business opportunities cannabis lending offers your bank
• Convincing your Board to agree to a cannabis line of business
• Current legal, regulatory, and reputational considerations
  

Webinar Outline:

Overview and Introduction

Structure and Operation of the Cannabis Industry

• Potential alignment between your institution’s goals and cannabis businesses
• Organization—cultivation, manufacturing and processing, distribution, transportation, and retail
• Leases—typical term, risk premiums, etc.
• Current industry sources of capital
• Operations of a cash business, etc.
  

Developing Your Lending and General Business Strategy

• Strategic alignment
• Gauging cannabis lending business risks against your institution’s risk profile
• Clearly identifying your lending goals
• Ancillary benefits—a stable source of deposits, fee income, etc.
• Understanding the market from a lending perspective
• Possible lending opportunities both in and outside your immediate market area
• Acceptable collateral
• Leveraging the information you have for business development
• Expanding "Character" and "Collateral" as part of the 5C’s of lending
• Enhanced monitoring
• Mitigating risk with enhanced due diligence
• The importance of data in ongoing monitoring
  

Legal and Regulatory Considerations

• Current state and federal requirements
• FinCEN guidance
• The expectations of your examiners
• Federal SAFE and SAFER Acts, putting into writing what’s already happening in practice
  

Winning Board Approval

• Briefing the Board
• What background materials should be presented to the Board
• Review of the business opportunity
• Discussion of the reputation risk, real or perceived
• Regulatory compliance requirements
• Experience with other financial institutions in your market area