Cannabis property bridge loans

What lenders look at

Federal illegality and banking limits

Marijuana remains illegal under federal law even where states allow it. Rescheduling has been proposed, but most banks and institutional lenders still avoid the sector, which limits lender choice and affects the exit.

State license tied to the property

Cannabis licenses are often tied to a specific address. Lenders review the license, its renewal status and whether it could move if the tenant leaves.

Landlord vs operator

Many lenders prefer to lend to a landlord that leases to a licensed operator rather than to the operator directly, and review the lease and the tenant’s finances.

Zoning and buffer rules

Local zoning and required distances from schools, parks and other uses limit where cannabis businesses can operate, which can add value to compliant sites.

Alternative use value

Lenders look at what the building would be worth to a non-cannabis user, since that is their downside if the cannabis use ends.

Insurance

Coverage for cannabis-related properties can be harder to obtain. Lenders confirm adequate property and liability insurance is in place.

How leverage works

Because fewer lenders participate and the regulatory risk is high, private lenders on cannabis property usually lend at lower leverage than on other commercial real estate, often at or below the 50–65% of value range. Many size the loan on the building’s value to a non-cannabis user rather than on cannabis rents, which can be higher than market. Lenders do not lend against the license or the cannabis business, and buildouts are often valued conservatively.

Use the commercial bridge loan sizer to see whether LTV or LTC decides your loan. The deal form asks for square feet, occupancy today and current NOI, so lenders see the numbers they size on.

Documents lenders ask for

• State cannabis license and local permits
• Lease agreement with the licensed operator
• Tenant financial statements and operating history
• Zoning verification and buffer compliance
• Trailing 12-month property operating statements
• Insurance declarations for property and liability
• Purchase contract or payoff letter
• Appraisal or broker opinion of non-cannabis use value
• Entity documents and sponsor schedule of real estate

How fast it closes

Cannabis property bridge loans can close in roughly 7–30 days with a private lender that already works in the sector. Timing is usually driven by license review, legal review of the lease and structure, insurance and finding an appraiser comfortable with the property type. License transfers or local approvals add time.

Common bridge scenarios

Landlord acquisition

An investor buys a building leased to a licensed cannabis operator and uses a bridge loan because banks will not finance the property.

Sale-leaseback

A licensed operator sells its building to an investor and leases it back, and the investor uses a bridge loan to close.

Maturing loan payoff

An existing private loan on cannabis property matures and the owner needs to refinance with another private lender.

Cash-out for expansion

A property owner takes equity out of a cannabis-leased building to fund another acquisition. See cash-out bridge loans.

Typical exit

Cannabis property bridge loans are usually repaid by refinancing with another private or specialty lender, a sale of the property, or a conventional loan if the cannabis use ends or federal treatment changes.