MASSACHUSETTS: Shut out of traditional bank loans, budding entrepreneurs who want to sell medical marijuana in Massachusetts have been forced to get seed money from a host of unconventional sources — from restaurant and nightclub owners to friends and family, landscapers and even former legislators.
A Herald review of the 181 applications for 35 licenses to sell marijuana reveals financial commitments from a hodgepodge of sources. Marijuana is still illegal in the eyes of the federal government, meaning banks can’t issue small business loans, which are federally backed, to pot store owners.
“Getting a financial institution to give you a loan is almost impossible; everyone tries, and they’re eventually forced into an all-cash business model,” said Chris Walsh, editor of Medical Marijuana Business Daily, who has tracked dispensary financing in the Bay State. “What you’re seeing is people with deep pockets and professionals from other industries are the ones getting involved, not necessarily the guy who’s been growing marijuana in his basement for the last decade.”
To secure a Massachusetts license, dispensaries must have $500,000 in escrow — a higher bar than most other states — and must operate as nonprofits. Walsh said investors are tantalized by being on the ground floor if recreational use is legalized across the country.
“I think people want a piece of this business, no matter how they can get it,” Walsh said.
Andrea Nuciforo, a lawyer and former state senator from Pittsfield, pledged $423,000 to Kind Medical Inc., led by a Westfield doctor who is eyeing a dispensary in Amherst that he said will be “patient-focused, compassionate, secure and accessible.”
“Members of our team think that it’s an exciting time to be involved in something like this,” Nuciforo said. “It may be new in Massachusetts, but it is certainly not new to the country.”
But banks are steering clear. Weymouth Bank President Robert Terravecchia said the lack of federal backing and the potential hit to the bank’s image — it sponsors anti-drug programs in schools — means loaning money to pot stores is not worth the risk.
“I’d really just prefer that they wouldn’t apply, but you can’t prevent that,” Terravecchia said.
Of the 181 applications submitted to the state Department of Public Health, 159 passed the first-phase review, which was focused on finances.
The phase-2 review will include full criminal background checks, said DPH spokesman David Kibbe. Attorney General Martha Coakley’s office, which oversees nonprofits, is also involved.