Leading Cannabis MSB I Most Trusted Cannabis News Source I Est. 2013

Full News Story

Whitney Economics Report Indicates Cannabis Operators Topped $3.8 Billion In Delinquent Payments In 2023

Running a business is never for the faint-hearted, and the cannabis industry is proving to be a particularly harsh environment, marked by high aspirations dampened by bureaucratic hurdles and financial woes.

The United States has stood witness as the cannabis market is facing a monumental challenge in the form of staggering outstanding payments to the tune of billions. This financial fiasco, unearthed by Whitney Economics, paints a picture of an industry struggling under the weight of unpaid debts with no straightforward resolution in sight.

The Grave Statistics

Whitney Economics’ 2023 U.S. Cannabis Delinquent Payments Report sheds light on the challenging financial landscape of the cannabis industry. The findings are concerning:

  • $3.8 Billion in Delinquent Revenue: Cannabis operators across the U.S. grapple with an excessive pile of unprompted bills, eclipsing $3.8 billion and expected to top $4.2 Billion in 2024.
  • The Hardest Hit Sect: Cannabis cultivators find themselves at the epicenter of this storm, weathering severe blows to their accounts receivable. Conversely, retail businesses, although not impervious, have the least to worry about in terms of debt woes.
  • Small Operators Under Siege: One of the most disconcerting subtrends is the disproportionate impact on smaller and minority-owned businesses. Struggling to find financial footholds, these enterprises bear the brunt of the payment delays.
  • Regulatory Renegades: Delinquent payments are inciting widespread regulatory and macroeconomic pressures that have created a domino effect, compelling operators to adopt a ‘survival first’ mentality that jeopardizes their long-term economic sustainability.
  • 44% of the respondents indicated that delinquent receivables were impacting their ability to service their debt while 34% indicated that is impacting their ability to pay their taxes
  • 57.3% of survey respondents indicated that delinquent accounts receivables have a greater impact on their cannabis business than federal tax code 280E

“The pressures created by current macroeconomic factors and regulatory policies have incentivized operators to stop paying their suppliers,” Beau Whitney of Whitney Economics commented. “This data further affirms the fact that the cannabis industry is struggling. Unless there is some form of federal and state regulatory intervention, the issues associated with the lack of payments will only get worse.”

California Attempts To Cut Into Debt

In California, where cannabis is prevalent, the industry has made a clear effort to address this financial challenge. The formation of the Financial Stability for California Cannabis (FSCC) coalition last year is not just a unified voice of caution but a proactive endeavor to seek redressal and long-term solutions. Leading cannabis companies such as Kiva Sales & Service, Lowell Farms, Nabis, and Sunderstorm banded together, representing nearly half of the state’s booming cannabis domain.

This coalition is pioneering efforts to highlight and rectify the severe credit issues that have thrown the state’s cannabis industry into disarray. Months-long waits for payments are not merely inconvenient; they are catalysts for destabilization, especially for smaller operators and businesses.

The coalition supported AB 776, a bill that failed earlier this year, aimed to enforce timely payment obligations between licensees in the cannabis industry.

It required licensees to settle invoices worth $5,000+ within 15 days and report unpaid invoices to the Department of Cannabis Control. Failure to pay could lead to disciplinary actions and a prohibition on credit purchases until the outstanding invoice is cleared. The bill set a 30-day deadline for invoice payments and excluded transactions made before January 1, 2024.

The insights from Whitney Economics’ 2023 U.S. Cannabis Delinquent Payments Report shed light on a significant issue within the cannabis community. It reveals a story of financial challenges that endanger the industry’s sustainability. The increasing financial strain on operators due to overdue payments poses a crisis that weakens the industry.

This situation is not just concerning; it is clearly unsustainable. The impact on smaller, often minority-owned businesses emphasizes the deep-rooted inequalities and financial obstacles in this sector.

Addressing these challenges collectively is crucial for the cannabis industry to progress. Initiatives like the Financial Stability for California Cannabis (FSCC) and advocacy for legislative changes are steps in the right direction.

However, combating financial instability in the cannabis sector requires comprehensive changes to ensure fair practices, timely payments, and a strong economic foundation. The industry’s future relies on rectifying these unsustainable practices through industry-wide efforts to establish a more equitable and financially stable environment.

SEARCH MONTHLY NEWS
Share On Social

Sign Up For Friday Sesh

RECENT POSTS
POPULAR POSTS

Submit Your News Below