Why Cannabis Business Owners Struggle to Secure Mortgages and How to Overcome It

Owning a cannabis business is rewarding but comes with unique financial headaches – including getting a mortgage. Unlike their employees, cannabis entrepreneurs deal with even greater scrutiny from banks.

For example, Maria owns a successful dispensary with $500,000 in annual revenue. Despite her profitability, she was denied a home loan due to her business’s cash-heavy nature, and the fact that they determined that she was in the Cannabis industry. "I feel like I'm being punished for working in a perfectly legal industry," she said.

Why Cannabis Business Owners Struggle:

Cannabis business owners face even steeper obstacles than their own employees when it comes to qualifying for a home loan.  Here are some of the top hurdles they face: 

• 💵  Income Volatility: Business income often fluctuates more than W-2 wages.

• 🗒️ Banking Limitations: Many banks refuse to handle cannabis industry funds, forcing owners to rely on cash-heavy operations.
  
  
• 🚫 No lender support from Fannie Mae, Freddie Mac, FHA, VA or USDA.  Lenders get no support from the traditional Government Sponsored Entities (GSEs) Fannie Mae (FNMA), Freddie Mac (FHLMC) when the applicant is self-employed. Additionally, government-insured mortgages like FHA, VA and USDA do not permit Cannabis industry income for qualification.  This support is essential for many lenders to give them stability as the monthly loan payments are being made. 
  
  
• 📣 Tax Deduction Complications: Owners often maximize deductions, lowering their taxable income and hurting their mortgage eligibility.

Solutions:

Here are some top tips to make your mortgage journey go quickly and easily.

• ✅  Use Cannabis-Friendly Lenders:  Lenders like us specialize in assisting cannabis professionals.  Choosing the right lender is especially important when you are self-employed, because most lenders-- even unconventional, non-QM, or non-traditional lenders--will not accept Cannabis industry income sources when the applicant is self-employed.  
  
  
• ✅  Optimize Tax Filings: Work with a CPA to balance deductions with income verification.  Or ask your Cannabis-friendly lender if they offer programs like 📌 Bank Statement Loans or 📌Profit & Loss Statement Loans, which offer the lender alternative ways to determine your business' true profitability. 
  
  
• ✅  Maintain Separate Accounts: Keeping business and personal accounts distinct can simplify documentation.
  
  
• ✅  Be Transparent About Your Industry: When applying for a mortgage, tell your lender upfront that you are self-employed in the cannabis or hemp industry. Don’t assume your lender will recognize the nature of your employment from the business name alone. For example, "Dreamy Green Farms" may not obviously indicate a cannabis industry business.
  
  Many lenders do not screen for Cannabis income until later in the process, and a last-minute loan denial after you've entered a purchase contract can be both heartbreaking and costly.

Conclusion: 

Cannabis business owners must work with the right financial partners to overcome these systemic barriers. 

If you're self-employed in the Cannabis or Hemp industries, be sure to check out our Cannabis Lending Programs. 

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You can also drop us a line HERE »

Yours in successful homeownership,

Derek Bissen
Loan Originator
NMLS#365627
Unconventional Lending Program Director

Derek Bissen is a licensed Mortgage Loan Originator with over 25 years of experience in the industry. Derek is a self-employed lending expert who is known for his ability to work with borrowers who have substantial wealth and non-traditional lending needs. He is a creative loan structurer and specializes in portfolio lending, asset-based lending, bank statement lending, as well as traditional loans such as Conventional, FHA, VA, and first-time homebuyers. Derek's expertise in the mortgage industry is unparalleled. He is a trusted advisor to his clients, providing them with customized loan solutions that meet their unique financial goals and needs. His vast experience and knowledge make him a valuable asset to anyone looking to purchase a home or refinance their existing mortgage. As a highly-experienced loan originator and author, Derek is committed to sharing his knowledge with others. He regularly provides valuable insights and advice to readers looking to navigate the complex world of mortgage lending. His articles are informative, engaging, and backed by years of hands-on experience. With his wealth of knowledge and dedication to his clients, he is the go-to source for all your mortgage lending needs. If you're looking for a reliable and trustworthy mortgage expert, contact Derek today to learn more about how he can help you achieve your financial goal