How the SAFE Banking Act Could Boost Cannabis Tech Adoption
June 5, 2020 With Senate Republicans reportedly taking a wait-and-see approach on the next round of coronavirus-based stimulus payments, momentum for its inclusion of legal cannabis industry has understandably taken a bit of a hit.
Approval of the bill as-is from the House – which would include implementation of the long-awaited SAFE Banking Act in legal cannabis – could be a huge boon to an industry that has, for the most part, put its head down and professionally continued serving its customers and patients amid a massive human health epidemic.
I touched based recently with Urban-Gro’s Colin Ferrian, who I first ran into out in Las Vegas at MJ Biz Con, my first cannabis industry event as a working journalist, to see how he was feeling about the bills’ chances. I also wanted to ask whether he thought the approval of the SAFE Banking legislation would not only uplift growers, but also the technology providers in the space.
“You know, I’m not sure I’ve heard anyone really talk about that before, but you’re exactly right. That would probably make a world of difference in this industry, no doubt,” Ferrian says.
The current Director of Enterprise Solutions with the Lafeyette, CO-based cultivation technology outfitter sees firsthand on a regular basis why some solid banking regulations for cannabis growers could be impactful. A quick glance at Urban-Gro’s website shows a dizzying array of different types of advanced cannabis cultivation technology for grows, like a neighborhood Best Buy, but only for cultivators.
And it’s all stuff that many growers want, and oftentimes even need, yet it’s probably safe to assume in some cases the prospect of plunking down six figures of cold hard cash for a piece of equipment for the greenhouse gives any grower-owner pause, coronavirus recession or not. And there’s no John Deere Credit in legal cannabis, unfortunately. Not yet, anyways…
“What we have right now is people having to pay cash up front for $300K environmental controllers, and understandably that’s really difficult to do unless you’re some giant multi-national,” Ferrian says. “It would create massive opportunities if the SAFE Banking Act came through, both on the lending side and then also for cultivation operations. It would be an absolute game-changer.”
Ferrian does note, however, that there is some disagreement within the industry on whether the SAFE Banking Act will truly open up a suite of financial services for cannabis growers similar to what small business owners in other industries have at the ready.
“I’ve heard some mixed thoughts about this, that SAFE Banking will give us access to banks and some of those financial services; but unfortunately, it still wouldn’t necessarily usher in traditional financing products for cannabis growers,” he explains. “There are some concerns around the banks being exposed to risk levels well beyond the FDIC liability coverage when it comes to cannabis financing, those sorts of things.”
While many, yours’ truly included, had opined that a socially distanced world is the perfect application environment for automation and robotics, Ferrian confirms there has been increased interest among growers since COVID-19 came around. But the cash-up-front issue is still tough to overcome.
“We’ve had a lot of interest (since COVID), there’s no doubt,” he says. “But these same facilities are also putting social distance plans into place. You’re used to working with a crew of 10 for a 10,000-square-foot greenhouse, and now you’re down to five workers. This is causing huge headaches for growers, even with the increase product demand.
“We’ve maybe even hit a peak for demand for automation and sensors for remote monitoring grows,” Ferrian adds. “But, here’s the catch. The money is often not there, and people are asking for financing and it just doesn’t exist other than some very high interest rate stuff. If you’re using those services right now, generally, you’re probably not getting the best terms.”
And now, thrown from a humming-right-along to a barely-on-life-support economy in the matter of weeks, most legal operations are behaving how anyone would during such uncertainty. Hold cash, keep doing what I can to keep the doors open, and hope things get better in the very near future.
“We had such momentum going in this industry and it’s really just thrown a wrench into the gears now unfortunately,” Ferrian says. “From a glass-half-full aspect though, the farms that emerge from this situation will know how to run a very efficient, cost-effective operation. If you can make it through a pandemic, you can easily survive the competition in your area.”
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