Vol. 6, Number 3
cheryl riley, editor & writer
Dr. David Bearman,
Gradi Jordan, Ed Glick,
Sunil K Aggarwal,
Jim Greig, Joan Bello,
AAMC El Dorado County CA
AAMC Rhode Island
The Drug War is Over, Almost - David Bearman, M.D.
The average American probably doesn’t realize it but the war on marijuana started as a war on hemp. With the recent passage of the Farm Bill the other day, which legalized the growing of hemp in ten states, the federal war on hemp is now officially over. This hemp war was based on the avarice of many in the petrochemical industry. It never should have started. Now we will see the boost to the economy that hemp will provide.
In 1937 the vast majority of Americans knew what hemp was and knew what cannabis was. The House took what was then a rather obscure word in the Anglo and Black communities, marijuana, to pass a tax which essentially outlawed hemp. The AMA testified against the MTA. They testified that they knew of no harm from the medical use of cannabis. They noted that they were not even consulted in the two year development of the bill.
Why hemp? Because petrochemical giant DuPont feared competition from hemp for many of its products – nylon, rayon, cellulose, tetra ethyl lead, and sulfites. Further DuPont was the major stock holder in GM. Ford, a GM competitor, had an experimental car made largely out of hemp and that ran on hemp. The Marijuana Tax Act was an easy way to get rid of serious competition.
Why 1937? The invention and impact of a modern harvesting device called a decorticator, had cut in half the labor necessary to harvest and prepare hemp for industrial use. This made hemp extremely competitive for natural and synthetic products made from cellulose. The waste product of hemp, the hurd, is cellulose. Also ethanol can be made from hemp. Further it takes four times as much sulfite, an environmental pollutant, to make paper from wood pulp than from hemp hurd. In fact in early 1938 “Popular Mechanics” ran an article called hemp “the next billion dollar crop.” And that was when a billion dollars was a lot of money.
Farm Bill of 2014. With the bipartisan passage of the Farm Bill in early February 2014, ten states can now legally grow hemp – California, Colorado, Kentucky, Maine, Montana, North Dakota, Oregon, Vermont, Washington and West Virginia.
Hemp; A boost to the economy. Some of your more avid readers may recall that my 2008 run for 3rd district supervisor included a campaign plank to permit growing legal hemp in Santa Barbara County. Well I wasn’t elected, but that time has certainly come for hemp legalization. I look forward to many of our local farmers and ranchers taking advantage of the new farm bill and once again making hemp, the world’s top commercially successfully agricultural crop ,as it was for a thousand years until the 1880s .
How to Secure Expansion Capital in the Medical Marijuana Industry - Dan Page
Qualifying for small business expansion capital can be difficult for any business. But it can seem darned near impossible for businesses in the medical marijuana industry, since traditional lenders typically don’t want to touch anything that even hints at illegality.
This hard reality can stunt the growth opportunities for many business owners in our industry.
But there are some silver linings, if you’re looking for expansion capital.
First, let’s take a look at the less likely funding scenarios that you’ll want to avoid, then we’ll move on to some possibilities.
Three Sources of Capital That are Probably Not the Best fit for the Medical Marijuana Industry:
1.) Invoice Factoring: A “Factor” buys future income, and gives you money for your future income, today. Factoring can be a great resource, especially if you are in a B2B environment. Unfortunately, it is not a good fit for the Medical Marijuana industry since most (if not all) sales are from individual consumers and there are not any “invoices” to factor.
2.) Purchase Order Financing: When a company has a large order for goods or materials, this order can be financed through “P.O. Financing”. The funding company will advance money, and collect their funds once the order has been delivered. P.O. financing is most often used with large business contracts, but again…not a great fit for a typical dispensary.
3.) Merchant Cash Advance Loans: With a cash advance loan, the funding company advances capital and then withdraws money from your bank account on a daily basis, via ACH. The good news is that Merchant Cash Advance loans can be easier to qualify for than other types. The bad news is that often (but not always) you need credit card receivables to make it work. If you decide to go this route…I urge you to be very careful. When you combine the upfront fees you pay and the fact that money is being withdrawn from your bank account on a daily basis, your effective cost of capital can skyrocket to north of 50% - 80% annually.
Three Sources of Expansion Capital That Might Work:
1.) Asset Based Loan: If you have assets (home, Real Estate or other assets), you may be able to secure a loan from your bank. If that is possible, then definitely grab it, since it will be your cheapest source of capital. There are also a number of non-bank asset based lenders that will loan against your assets. They’ll charge more than a bank, but if your margins permit, it can be a sound financial decision.
2.) Credit Based Loan: In the non-bank lending industry, there are some lenders that will finance you based simply upon your credit score and annual income. You’ll typically need a FICO of at least 700 or 750 to qualify. But if you have good credit, this might be a good fit for you.
3.) Expansion/Cash Flow Funding: This type of financing that may perhaps be the best fit for the Medical Marijuana Industry (or possibly the Recreational Marijuana Industry if you are in Colorado or Washington), at least until the industry becomes more legitimate in the eyes of the banking community.
This unique financing package is a combination of factoring and a traditional term loan, and it is what we do at my company, Funding Strategy Partners.
As in factoring, we purchase a portion of your future income, except that we are not purchasing any particular receivable or contract. Instead, we buy a fixed amount of future income and give you cash up front. And like a term loan, you have a fixed monthly payment, with a maximum of twelve months to repay.
To qualify, you need to have been in business a minimum of one year (two preferred), generate at least $500k in annual revenue and have a healthy business that is making money.
Remember, if you can qualify for a traditional bank loan, this will always be your cheapest source of capital. But banks are notorious for not lending to small businesses. And being in the Medical Marijuana space only makes things more difficult.
Important: Every non-bank lending scenario above is going to have higher interest rates than a traditional bank loan. When does it make sense to use them?
When your profit margins are comfortably higher than the cost of funds.
For example, if you have 50% Gross margins and you can leverage someone else’s money for a 25% interest rate, this can be a very smart business decision.
Be careful though…sometimes lenders will quote a low interest rate, but add additional costs such as underwriting fees, administrative fees, points and other costs. By the time you do the math, your cost of funds can skyrocket. So be sure to ask about any additional fees. Lastly, ask if you can repay the funds early without a pre-payment penalty. This will also help to keep your costs in check.
Dan Page runs Funding Strategy Partners, a boutique funding company that helps small businesses to grow by providing expansion capital. Dan can be reached at firstname.lastname@example.org or by calling 303-938-8280.
Alabama: Considering a medical marijuana law.
Arkansas: Considering a medical marijuana law.
Idaho: Considering a medical marijuana law.
Indiana: Considering a medical marijuana law.
Iowa: Considering a medical marijuana law.
Maryland: Considering a medical marijuana law.
Minnesota: Considering a medical marijuana law.
Missouri: Considering a medical marijuana law.
New York: Considering a medical marijuana law.
North Carolina: Considering a medical marijuana law.
Ohio: Considering a medical marijuana law.
Pennsylvania: Considering a medical marijuana law.
South Carolina: Considering a medical marijuana law.
South Dakota: Medical marijuana petition drive underway.
Tennessee: Considering a medical marijuana law.
Texas: Considering a medical marijuana law.
Wisconsin: Considering a medical marijuana law.
Featured Recipe - Ginger Snap Heaven
Contributed by Ms. BuB
We are fortunate indeed to be receiving some wonderful recipes from friends and readers. This cookie treat recipe was provided by a very cool lady who knows how to cook. She uses the "Hacksaw" crock pot method of making cannabutter. I've tried it and it works great.
If you're like me you're not an immediate fan of ginger snaps. These, though, are great. Ms. BuB has come up with a recipe that is scrumptious without any canny aftertaste.
½ cup Better Bud Butter or Hacksaw butter
Melt the butter over low heat and mix in molasses then sugar. Stir well. Sift together all of the dry ingredients (sifting both mixes and adds air) then gradually add to butter/molasses/sugar mixture with constant stirring and heat turned off.
Roll the cookie dough into a log, wrap in wax paper, and refrigerate until firm.
Remove from refrigerator, unwrap, and slice thin, placing the cookies on an ungreased cookie sheet.
Bake at 325 degrees for 10 minutes. Cookies will plump up. Cool on a rack and enjoy!
Warning from Ms. BuB: Do not eat too many cookies! These are very potent and sneaky cookies.
May 8, 9, 10, 2014
Portland, Oregon USA
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Medical Marijuana States
District of Columbia
Rhode Island *
* States with reciprocity law