Marijuana companies seeking loans must be careful to avoid the trap of predatory lenders

(This is an abridged version of a story that appears in the February issue of Marijuana Business Magazine.)

Predatory lending, which gained special notoriety during the early 2000s, can debilitate a marijuana entrepreneur who’s trying to start or scale a business.

Predatory loans typically involve a lender who relies on unfair or misleading tactics to entice a borrower to sign for a loan with a huge interest rate or other terms that are bad for the borrower.

Marijuana companies are especially vulnerable, since most traditional lenders are reluctant to serve cannabis companies because the plant is illegal under federal law.

That situation has prompted marijuana entrepreneurs to seek out alternative forms of finance, including predatory lenders who can charge interest rates of 20% or more.

“This has happened for quite some time in the industry,” said Evan Eneman, CEO of Ello, a Los Angeles financial, tax and advisory services firm serving MJ businesses.

Marijuana Business Magazine spoke with Eneman and other experts to learn how to avoid predatory lenders. Click here to read more about:

• Recognizing a predatory loan and predatory lenders
• Doing due diligence
• Reading the fine print
• Walking away

If you believe you might have gotten into a predatory loan, click here for tips on how to change the situation.