Banks won't finance pot shop properties
DENVER (AP) — Banks holding commercial loans on properties that lease to Colorado marijuana businesses say they don't plan to refinance those loans when they come due.
That's according to The Denver Post (http://bit.ly/1jcE2mv), which reported Wednesday that the banks' position is based on the fact that marijuana is illegal under federal law. Their stance has left some property owners looking for financing.
Bankers note that property used as collateral for these loans are theoretically subject to federal drug-seizure laws. That makes these loans a risk.
Just last week, federal banking regulators announced a roadmap for banks that might do business with the marijuana industry. The rules require banks to file reports on interactions with marijuana businesses and identify any questionable transactions. However, the industry made clear that the administration's tone didn't make banks feel much easier about taking pot money.
"It's just awkward because we're all caught in the federal-law issue," Vectra Bank CEO Bruce Alexander said. "We're seeing that when banks find out (about a marijuana business leasing a property), they are given an element of time to cure it, to get the tenant out or move on."
Colorado's two largest banks, Wells Fargo Bank and FirstBank, say they won't offer new loans to landowners with preexisting leases with pot businesses. And Wells Fargo and Vectra Bank have told commercial loan clients that either have to evict marijuana businesses or seek refinancing elsewhere.
"Our policy of not banking marijuana-related businesses and not lending on commercial properties leased by marijuana-related businesses is based on applicable federal laws," Wells Fargo spokeswoman Cristie Drumm told the Post.
"Part of the interpretation (of laws) is the Controlled Substances Act prohibits anyone from dealing with the substances or their proceeds," said Ron Tilton, executive vice president of FirstBank. "Someone collecting rent from a dispensary or grow house, that's the proceeds of an operation and therefore is illegal."
How much of a property is leased to a marijuana business is another factor.
"If it's 100 percent of a property, we'll not go for it," Tilton said. "A retail operation in a small strip center, and less than 20 percent is to a marijuana business, we'll look at the borrower and see if he's substantial enough (financially)."
The problem may not have filtered down yet to store owners who rent space from landlords.
Mike Elliott, executive director of the Medical Marijuana Industry Group, said he hasn't heard concerns from his members yet about the issue. But he said the report is another reason why the new industry needs more definitive action on banking — whether through an act of Congress or more action from the White House.
Information from: The Denver Post, http://www.denverpost.com