Worcester Business Journal

wbjournal.com | August 16, 2021 | Worcester Business Journal 9 W hen Ulyssess Young- blood was initially looking for financing for his Worcester cannabis business Major Bloom, he spoke to several local banks about loans, but was rejected by every one. e legal cannabis industry has moved beyond its cash-only beginnings, but social stigma and lack of federal assurance hamper its financing options Almost fully banked BY SLOANE M. PERRON Worcester Business Journal Staff Writer "I would get shot down and not let it deter me," Youngblood said. "Knowing that it is federally illegal, or that was kind of the notion that everyone had." Ultimately, Youngblood raised money on his own through friends, family, and his local community. He did speak to venture capitalists and investors but wanted to retain control of his company, so he decided to self-fund his business. He did secure banking services with Northern Bank in Woburn and took advantage of its equity pricing program. "I honestly think in terms of legal- ization [of marijuana] the No. 1 issue is banking, and I mean that from a per- spective of distributing wealth," he said. In its initial years, the legal marijuana business struggled without banking ser- vices, essentially operating as a cash-only industry as financial institutions didn't want to risk their standing with the Fed- eral Deposit Insurance Corp., as cannabis still is illegal federally. However, the banking industry has now found enough work arounds to provide cash manage- ment services to cannabis operators, although the stigma and the illegal label federally still prevents the industry from fully accessing financial services. "We are currently pretty close to being fully banked from a cash management standpoint in this industry," said Steve Hoffman, chairman of the Massachusetts Cannabis Control Commission. "ere is unquestionably still a stigma around marijuana, you cannot legislate or regu- late that stigma away. It takes time." is stigma may influence whether or not banks opt into this industry, particu- larly among local banks vigilant of their reputations, Hoffman said. e lack of full financing services hurts operators like Youngblood, who don't necessarily have access to a large amount of wealth outside the bank- ing system, and the early operators in Massachusetts' cannabis industry tended to be large corporations with multiple investors. is has hampered the social equity goals established when Mass. vot- ers legalized adult-use cannabis in 2016. Banking providers Lighthouse Biz Solutions, a cannabis financial services subsidiary of GFA Federal Credit Union in Gardner, is one of six institutions in the state to provide banking services to cannabis companies. Lighthouse President Tina Sbrega said the dichotomy between state and federal laws makes banks hesitant to take on cannabis operator clients due to the federal illegality of marijauna and sub- sequent FDIC compliance issues. is creates obstacles for cannabis businesses such as restricted access to banking; taxation in which cannabis operators are not able to use certain deductions for gross adjusted incomes; and cannabis employees being shunned by banks when trying to deposit their earnings. At Lighthouse Biz Solutions, cannabis operators are treated like any other small business, because they are legitimate businesse, she said. Sbrega described cannabis businesses as the same as a manufacturer, shoe store, or any other local startup. "I don't want to make that contrast because they are the same. What makes them different is the unique obstacles and challenges they face," she said. e only banking benefits cannabis operators cannot partake in due to federal laws are use of corporate credit cards and wire transfers. Lighthouse offers clients access to its professional network of canna-friendly businesses such as lawyers and accountants, and it formed a partnership with a consulting firm to help cannabis operators navigate the strict and ever-evolving licensing procedures. "Everyone is in the same boat since they are all startups, and they need to create their own ecosystems," Sbrega said. SAFE Bank Act Hoffman said the CCC sees passage of the federal SAFE Banking Act as key to protecting cannabis business owners from unscrupulous lenders while facili- Continued on Page 10 PHOTO/SLOANE M. PERRON Ulysses Youngblood, owner of Worcester cannabis business Major Bloom

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