4 min read
Listen and subscribe to The Big Idea on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
Securing financing for a small business is no easy feat, but it’s even harder for those in industries where there’s evolving legislation.
On Yahoo Finance’s The Big Idea podcast, Erin Gore, the founder of cannabis company Garden Society, detailed the extra hoops those in her industry have to jump through to build a company.
“What we don't have is access to credit, and what we don't have is services around it," Gore told podcast host Elizabeth Gore, who is also her sister-in-law. "So, like, we cannot get a 401(k) — we keep getting denied for 401(k)s for our employees because of the federal illegality of it. We can't get a line of credit for payroll. We can't access any financing services, like equipment financing or mortgages. Our personal bank accounts get shut down.”
The cannabis industry was estimated to be worth $38.5 billion in 2024, and marijuana is currently legal for medical use in 39 states and for recreational use in 24 states.
However, because marijuana is still classified as a Schedule I drug federally, traditional financial institutions often avoid working with cannabis companies due to the risk of federal penalties and running afoul of anti-money-laundering regulations.
One piece of legislation introduced in the House of Representatives in 2023, known as the Secure and Fair Enforcement Regulation (SAFER) Banking Act, would offer protections to federal financial institutions that offer banking services to cannabis companies in states where it’s legal. But the bill has stalled in Congress.
As a result, while an industry with this much capital and growth may seem like a prime opportunity for some budding entrepreneurs, these owners face significant financial hurdles.
Without usual lines of financing, Gore has had to get creative to ensure her business can continue growing. Cash flow has been essential to keeping her company afloat.
She shared that a potential investor once asked her what her cash-to-cash cycle time was, meaning how quickly she saw a return after investing in a product.
Gore said the cash cycle is around 160 days for Garden Society-branded products, “on a best-case scenario.” But she found that by manufacturing cannabis products for other companies, she could have those firms pay for materials and manufacturing up front, drastically reducing that cash-to-cash cycle timeline and bolstering her profits while diversifying her company’s streams of income.
"I shortened my cash-to-cash cycle time, which covered my overhead," Gore said. "It allowed me to invest in my brand. I all of a sudden had different revenue channels that offset my business and put a lot of resiliency and cash flow and profitability into my business."
