It’s no secret that the cannabis industry faces a dire financial situation. And unlike other businesses, there isn’t a safety net for bankruptcy. Cannabis companies face a financial crisis as debts mount and cash flows are dwindling. They struggle to remain afloat, while also navigating federal regulations.
You can’t get out without bankruptcy protection
The fact that cannabis companies are not protected by federal bankruptcy laws is one of their biggest problems. Because weed remains illegal on the federal level companies cannot file bankruptcy as a struggling retail or restaurant chain. The companies are left to scramble for other solutions such as restructuring debts, or trying to find a buyer who is willing take the risk.
Flux Markets
The cannabis industry’s financial troubles aren’t just about debt—they’re also about a market that hasn’t quite settled. The legal cannabis industry faces a number of challenges, including high taxes in certain states and fierce competition on the black market. Investors who once poured money into the “green rush” are pulling out, which leaves companies with no funding to stay afloat.
So, What’s Next?
Businesses in the cannabis industry have to become creative, as they do not enjoy bankruptcy protection. Others are restructuring their businesses through state receiverships, while some are directly negotiating with lenders. Unless federal laws are changed, this industry will continue to face financial obstacles that do not apply to other businesses.
As more states begin to legalize cannabis, and as federal reform is debated there are hopes that eventually the cannabis industry will get the same level of financial protection. The cannabis industry will continue to face one of the world’s most challenging financial environments until then.