When cannabis meets commercial finance, opportunity and risk collide in a legal gray zone that lenders can’t afford to ignore.
Editor’s Note: Monitor is proud to welcome Kenneth C. Greene as a regular legal contributor. A seasoned attorney with deep expertise in commercial finance, Greene brings clarity to complex, high-stakes issues that matter to our readers. In his ongoing column, The Greene Room, he will explore the ever-evolving intersection of finance and law — starting with this eye-opening look at the challenges of funding cannabis businesses in a legal landscape rife with federal conflicts. Stay tuned to Monitor for more ongoing, timely insights from Greene.
The global commercial finance market was valued at approximately $10.68 trillion in 2024. The U.S. share of that market was approximately $2.8 trillion. The legal cannabis industry appears to be valued at about $30 billion, with another $8 billion or so generated through illegal sales. Although these are only AI estimates, there is no doubt that the commercial finance industry is massive and growing. With these kinds of metrics, it should come as no surprise that the two powerhouse industries would intersect.
For many years, marijuana was illegal in all 50 states. It was also illegal on the federal level. So much has changed. Now, only two states (Nebraska and Idaho) outright prohibit the use of cannabis, so there is no cannabis industry there. Every other state in the U.S. has passed at least some legislation legalizing medical use. Twenty-five of those states allow recreational use only. Critically, both medicinal and recreational use remain illegal under federal law. As of late 2024, cannabis was classified under the Controlled Substance Act as a Schedule 1 substance along with heroin, LSD and ecstasy. In 2023, the Department of Health and Human Services recommended moving cannabis from Schedule 1 to Schedule III, which would recognize its medical use but not its recreational use. That has not happened yet. Even if cannabis is rescheduled, it will not change the fact that recreational use will remain illegal under federal law.
In the meantime, there are still opportunities to be found. Let’s look at California. As of February 2025, there were approximately 8,500 active cannabis licenses in the Golden State. Annual revenue for licensees averaged around $3.5 million. There were also about 4,800 licensed cannabis cultivation operations, and although I could not find reliable statistics on cultivators’ annual revenues, I do believe these can be lucrative businesses.
Dispensaries and cultivators, like all businesses, need working capital and equipment. Due to federal prohibition, however, they cannot access standard bank loans or government-backed funding like SBA loans. Instead, these companies look to non-bank lenders, equipment financiers and alternative finance sources. This type of financing is often considered high risk with attendant high costs. There are reasons for this.
In California, cannabis dispensaries and cultivators need a license issued by the Department of Cannabis Control (DCC). As stated on the DCC website:
During the second quarter (Q2) of 2025, DCC-led or assisted enforcement actions (separate from UCETF actions) that resulted in the seizure of $62.4 million worth of illegal cannabis, 44,187 illegal plants, 36,312 pounds of illegal cannabis flower, $89,535 in cash and 16 firearms.
The UCETF refers to the Unified Cannabis Enforcement Taskforce. It is run by the DCC and the Department of Fish and Wildlife and coordinated by the Homeland Security Division of California’s Office of Emergency Services. These agencies are no joke! If you are not licensed, they will shut you down. That is bad news for the lender or lessor. If your borrower is shuttered by a government agency, they can’t make their lease or loan payments.
An interesting twist on this risky business (from the lender’s perspective) arises when the financially distressed pot grower or seller seeks bankruptcy protection. I recently had a case in which a cultivation company stopped making its substantial lease payments, and my client stood to lose more than half a million dollars. The debtor found bankruptcy counsel but found no solace from the bankruptcy courts in this state. Bankruptcy courts are federal, and, as discussed above, the cannabis business is illegal under federal law. Whereas there have been a few cases that take a more “hospitable” approach towards cannabis-related companies, it is certainly not a reliable backstop for the financially distressed borrower. In the case I litigated, we were able to obtain a stipulated judgment for the entire amount of the lease obligation plus all of my client’s attorney’s fees and costs. The absence of bankruptcy protection was a major factor in that win.
Perhaps this type of business is not for the weak of heart, as it is hardly traditional or mainstream. No doubt many of the new entrepreneurs have an illegal market background, which might cast shade on their character. The penalties accompanying loss of licensure can be devastating to a creditor. And the equipment resale market is necessarily limited since there is a limited market. On the other hand, the absence of the bankruptcy panacea somewhat ameliorates the risk. If you engage in this type of credit, be sure to get personal guarantors who are involved in the business, thereby improving your chances of getting paid if the company folds.
There are a number of commercial finance and leasing companies primarily dedicated to funding the cannabis business. Some of the larger companies are FundCanna (over $200 million in capital funds deployed), Canna Business Resources ($100 million) and Entourage Effect Capital ($140 million). If you have the appetite, the business is there. Just be wary of the special legal issues and financial risks attendant to this new frontier.
Ken Greene is an attorney at his SoCal firm, the Law Office of Kenneth Charles Greene. The Law Offices of Kenneth Charles Greene present this article.
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