Short answer: many lenders have automatic exclusions for cannabis, weapons, explosives and similar categories. Sometimes the business really is in that category; sometimes a description just sounds like it. Either way, the fix is the right lender and an accurate description.
Real examples
- Wording, not risk. A Texas precision-electronics manufacturer was declined because its website described products in a way that tripped an explosives exclusion. Describing what the company actually makes, accurately, led to an approval.
- Cannabis tenant. A New Jersey commercial property with a cannabis tenant got a bridge term sheet at about 40% loan-to-value, which is rare because most lenders exclude federally illegal uses.
- Cannabis operator. A grower with multiple advances received a $10M private credit term sheet (12% cash interest plus 6% PIK) secured by its buildings, inventory and equipment.
What to do
- Describe your business precisely and honestly; vague wording invites the worst reading.
- Expect lower leverage and higher pricing for truly restricted industries.
- Go straight to lenders that have a policy for your industry.
Related: Private credit · Bridge loans
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