(WBEN) - 165 conditional adult-use recreational dispensary (CAURD) license holders have been approved in New York State to date, including 99 announced earlier this month. Only seven legal dispensaries are currently in operation for the state.
The next obstacles these new license holders now have to face is where they will get their financial backing and finding a place to operate.
Many financial institutions are hesitant or unwilling to do business with those in the cannabis space due to the fact that federally, the drug is still illegal. Banks are overseen by federal agencies and subjected to regulations.
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"It's very difficult," said Aleece Burgio, General Counsel and Strategic Advisor for MJI Solutions.
"The financial institutions are hindering the space on multiple levels. At the most basic level, we're talking about businesses being able to get an account with just a simple bank account to be able to do business with. When you look at it from the other end of the spectrum, we're talking about not being able to get loans, not being able to get any financial capital, and having to deal with the fact that we're still very much operating as if this is an illegal substance."
Burgio says a small handful of financial institutions in New York State do finance those in the cannabis industry.
"It's incredibly difficult to do so with those who are pre-licensed businesses. So if you're just trying to gear up and apply and get your license structure going, it's very difficult to get a bank account at the moment."
Newly-licensed CAURD holders are turning to private investment.
"If they're going to be raising capital or getting money from family members, that's really the only way they can do it," says Burgio. "Either through debt financing or equity, but you're not going to be able to really work and get a small business loan or any loan through a government entity to be able to start your business, which is prohibiting a lot of small businesses from getting going."
New York State promised investments and funds to those CAURD license holders via DASNY (Dormitory Authority of the State of New York). However, Burgio says these license holders aren't seeing the promised investment.
"What we're seeing right now is DASNY kind of walking its way back from the $200 million DASNY funds. At the moment, we don't believe that the money has been raised. There hasn't been any indication that it has.
And so these 300 potential conditional adult use retail dispensaries, who originally applied thinking that they were going to be having a loan from DASNY are now kind of being hung out to dry, because they can't really access that loan anymore. So now those who are anticipating a real estate loan, have to go and look for additional funds elsewhere."
If these businesses do get the funds to operate, they may be considering doing cash only while more rules solidify between banks and cannabis.
"They're going to try to work with programs where their software allows for possible debit card transactions, but for the most part, it's very difficult. And you're really subjected to this situation where you could get that shut down there. And then, even if you were doing debit card transactions a month ago, if that sale system is detected, and they're no longer allowing you to do those transactions, you have to go right back to cash business."
Banks or credit unions? Some local banks might be willing to work with those in the business, as some have sent out request for proposals to hold DASNY funds for those emerging in the cannabis industry according to Burgio.
"I know that Five Star Bank had submitted their application for a request for proposal to be the bank for this DASNY fund. So they might be willing to do it. I know Bank on Buffalo has discussed possibly doing it. But at the moment, you know, a lot of times it turns out that credit unions are the best people to work with more on the smaller scale."
Will the CAURD license holders see the funds? That's the million dollar question.
"I don't know if the funding is on the way but I will say that the best thing that you can do is try to get up and running as fast as possible and if the money isn't working out with DASNY, I recommend trying to do private raises, if possible," Burgio suggests.