Michaela Phillips, Guaranteed Rate, Inc.
Marijuana is a billion-dollar industry; according to Fortune magazine, Colorado alone surpassed the one-billion-dollar mark last year. This is a huge increase from the numbers seen in 2014, the first year of recreational sales. By 2020, numbers are projected to increase even more, perhaps bypassing two-billion dollars.
Of course, if you’re in the industry, this surge bodes well; it makes you money. Yet, when it comes to home buying, cannabis business owners continue to struggle procuring loans.
The main reason for this is that most of those in the marijuana industry deal in cash, making it harder to prove to lenders that they’re worthy of risk. Still, there are things business owners can do to help their odds of approval. And this begins with the following:
Make a paper trail
Pot’s propensity for cash-based transactions goes well beyond the actual store; those who own shops tend to deal in cash on a consistent basis, even paying rent in this manner. It might be convenient, but it’s not conducive to lending. Instead, create a paper trail: pay with a check as often as possible. This helps create a personal credit history, something a lender wants to see.
Clean up your credit report
Credit is one of those things you need to use in order to get. If you don’t rely on it regularly, it’s easy to overlook the issues impacting your score in a negative manner. So, before you check out your lending options, check out your credit report. Credit Karma is an easy and free way to access it. If you discover delinquencies, remedy them as quickly as possible.
Open a card
If you’ve never been much of a credit card user, become one. It might seem silly – why go into debt when you can pay in cash? – but lenders want to know that you’re capable of paying back whatever you borrow. To use credit wisely, don’t use it to the max. Rather, pay off your bill each month. This makes you look good in the eyes of the bank and keeps you from having to pay interest, as well.
Access current income data
If you own more than 25 percent of a business, the lender will require certain documentation before they consider your application. Two things they’ll want to see are your profit and loss statement and the balance sheet for your most recent quarter. Prepare these papers now so you don’t have to search for them later.
Marijuana is a very profitable business, but one largely free of credit. If you’re hoping to get a home loan, taking the above steps makes lenders want to trust you. Once they trust you, they’ll want to lend to you, too.
Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail [email protected] or visit michaelaphillips.com. NMLS:312874.
