[jbrown]

Rapid has funded around 10 medical marijuana establishments over the years. One of the issues is federal taxation - the IRS doesn't allow any deduction for "cost of goods sold" for illegal products. You also have to look at how close the establishment is to a school and what the prevailing enforcement actions are at the federal and state levels to assess your risk.

Law offices and collection agencies? I wouldn't want to try to collect on those businesses. Stay away from payday lender storefronts also, they are state regulated and can be shut down by the state without notice.

[Sean Cash]

Rapid has funded around 10 medical marijuana establishments over the years. One of the issues is federal taxation - the IRS doesn't allow any deduction for "cost of goods sold" for illegal products. You also have to look at how close the establishment is to a school and what the prevailing enforcement actions are at the federal and state levels to assess your risk.

Law offices and collection agencies? I wouldn't want to try to collect on those businesses. Stay away from payday lender storefronts also, they are state regulated and can be shut down by the state without notice.

Thanks for responding to this. So it looks like these deals can be done. With no COGS to deduct, it sounds like a very thin margin business. Do you need to see some sort of license or permit in the underwriting process? How do you verify that it's legitimate or enough to suffice?

[skideeppow]

Living in CO I had a lot of experience with getting some set up for processing. Their are a number of problems.
1. No bank located in the US will open and account for an MMJ operation. Now, that is not to say that the MMJ can disguise what they are doing, but if the bank gets wind of it, they will shut it down. Because banks are federally insured, any boarded of an MMJ facility puts that bank in jeoporady of losing its insurance.

There are also huge laundering issues with this. Because funds are crossing state lines. I opened a few MA but V/MC shut them down a few months later.

I also put in a few cashless ATM's there.

[Sean Cash]

Living in CO I had a lot of experience with getting some set up for processing. Their are a number of problems.
1. No bank located in the US will open and account for an MMJ operation. Now, that is not to say that the MMJ can disguise what they are doing, but if the bank gets wind of it, they will shut it down. Because banks are federally insured, any boarded of an MMJ facility puts that bank in jeoporady of losing its insurance.

There are also huge laundering issues with this. Because funds are crossing state lines. I opened a few MA but V/MC shut them down a few months later.

I also put in a few cashless ATM's there.

This is the kind of response I expected to hear. Sounds like this industry is really not worth getting involved in financially.

[jbrown]

Thanks for responding to this. So it looks like these deals can be done. With no COGS to deduct, it sounds like a very thin margin business. Do you need to see some sort of license or permit in the underwriting process? How do you verify that it's legitimate or enough to suffice?

Good questions Sean. Like everything else in MCA, there is a lot of underwriter judgement. Definitely we get the copy of their current license. We also ask about their supplier - to make sure they are legal there also. Sometimes we look at tax returns too, depending on the amount and the length of the term, strength of the bank statements, etc.