The prospect of federal rescheduling of cannabis has the lending community buzzing. We recently sat down with Alex Mazza, Director of Underwriting at Chicago Atlantic Group, as well as Michelle Haughton and Bobby Boyda of Needham Bank, to get their take on what rescheduling could mean for borrowers, lenders, and the broader capital markets.
Stronger Borrowers, Bigger Demand
One of the most immediate effects lenders anticipate is a meaningful improvement in borrower credit profiles, particularly for operators with retail operations. With the burden of Section 280E potentially lifting, operators should see more available cash on their balance sheets, thus deepening the pool of eligible borrowers. Mazza emphasized that this will drive increased demand for capital—but crucially, not an immediate increase in capital supply. In his view, new lenders are unlikely to rush into the industry given cannabis’ continued federal illegality and the robust internal processes required to set up a cannabis lending program.
That dynamic puts existing cannabis lenders in an enviable position. Mazza expressed enthusiasm about the opportunity, noting that established lenders are well positioned to meet the surge in demand, benefiting both themselves and the operators they serve. Over time, competition on the lender side will emerge, but at the outset of rescheduling, those already firmly in the cannabis lending space will command market share.
Evolving Loan Structures and Terms
Haughton and Boyda offered a complementary perspective, focusing on how rescheduling could reshape the lending products available to cannabis operators. Rescheduling could unlock new product types, including revolving lines of credit, equipment loans, and even blended rates for businesses that operate both cannabis and non-cannabis lines.
Perhaps most notably, the Needham team raised the possibility of cannabis companies gaining access to standard banking products like credit cards, which would further improve cash flow. At the macro level, they foresee cannabis banking evolving from a specialized niche into a more typical industry vertical.
Compliance Isn’t Going Anywhere
Both groups were quick to temper optimism with a dose of realism. Mazza noted that while rescheduling would increase certainty around tax strategies and the treatment of 280E, past-due tax liabilities will still need to be addressed. He also cautioned that the credit approval process is not likely to soften—and may actually become more rigorous as the pool of potential borrowers grows.
The Needham team echoed that sentiment, stressing that compliance overhead is not going anywhere. Cannabis borrowers will still need to navigate rigorous state-level regulations and licensing requirements. Further, FinCEN regulations will remain stringent for cannabis operators unless the SAFE or SAFER Banking Act passes. Lending to cannabis operators will continue to require additional expense relative to non-cannabis lending due to this compliance burden.
The Bottom Line
Rescheduling would be a significant catalyst for the cannabis capital markets, but the lenders we spoke with see it as an evolution, not a revolution. Borrowers may receive more product options, while existing lenders stand to benefit from a first-mover advantage in a market where demand is poised to outpace supply. Larger operators may eventually find leverage to refinance as bigger banking institutions enter the fray and competition increases, but for now, the cannabis lending world remains a space where experience and specialization carry real value.