$60M Loan Deal Suggests Banks May Be Becoming More Comfortable Lending to Cannabis Businesses
AFC Gamma, a publicly traded company that provides lending to the cannabis industry, said that it has struck a deal with Pasadena, California-based East West Bank and an unnamed bank for a $60 million credit facility that may be increased to $100 million under the deal. The story was first reported by American Banker.
In an interview with American Banker, AFC Gamma Chief Executive Leonard Tannenbaum “praised East West for lending to the cannabis industry, saying that marijuana companies need more banks to become involved—offering deposit services, armored car pickup services for cash, payment services, and loan options.”
“We need more banks to accommodate our customer base,” Tannenbaum said.
East West had assets of $62.2 billion at the end of the first quarter 2022. While the bank declined to comment for the American Banker article, its annual report to investors from February added a new sentence in its risk disclosures about its potential to service cannabis businesses.
“We face certain legal, reputational and financial risks as a result of serving customers in new or evolving industries that are subject to changing, and at times conflicting, laws, such as digital currency or cannabis related businesses,” it said.
Many banks do not service cannabis companies because, while now legal in a majority of states, the industry remains illegal under federal laws. Thus many banks are not willing to accept the risks associated with providing cannabis businesses accounts, loans, or other services.