The Hidden Crisis in Cannabis: A Deep Dive into Industry Debt
By: Nickole Neveu | VP of Operations for Cannabiz Credit Association
Have you ever stopped to think about what it really means for the cannabis industry to remain federally illegal? On the surface, it might seem like a non-issue. If you’re a consumer, you might think, “It’s legal in my state. I can buy it, so how does this affect me?” If you’re an employee in the industry, you might reason, “I have a job. My paycheck clears. It doesn’t touch me.”
I used to think the same way when I lived in Massachusetts, comfortably nestled in the state’s thriving cannabis market. But then I saw the numbers—the financial data that reveals a far darker truth. It’s something most people have only heard whispers about or seen the occasional news headline. But when you turn over the rock completely and see what’s underneath, you’ll find a systemic issue that impacts everyone. And it’s only getting worse.
Here’s what most people don’t realize: the debt crisis in cannabis is not just about companies failing—it’s about an industry that was set up to fail.
The Financial Fallout of Federal Illegality
Without federal legalization, cannabis businesses lack access to the traditional financial tools other industries rely on, like bank loans or lines of credit. Banks can’t (or won’t) lend to businesses that operate in what federal law still considers a Schedule I drug market. So, where did all the money come from to build this industry? Investors played a role, sure. But the real funding mechanism was something far riskier: extended credit terms.
In simpler terms, cannabis companies became their own banks. They offered their customers—other cannabis businesses—products or services with a promise of “net terms.” That means, “Take this today, and pay us in 30, 60, or even 90 days.” It sounds reasonable at first, but here’s the catch: extending credit is only sustainable if the borrower pays on time. And in an industry struggling with razor-thin margins, market saturation, and inconsistent regulations, late payments became the norm, not the exception.
The result? A mountain of debt that no one was prepared for.
By the Numbers: A Crisis Unfolding
As of 2024, the Cannabiz Credit Association (CCA) has analyzed over $1.3 billion in reported financial data. Here’s the staggering part: 52% of that debt is past due. Think about what that means. More than half of the money owed in this industry isn’t being paid on time—or at all.
This debt isn’t just a number on a spreadsheet. It’s a symptom of an industry-wide financial crisis that touches every corner of cannabis.
Why This Should Matter to Everyone
Whether you’re a consumer, an employee, or a business owner, the ripple effects of this debt crisis impact you directly or indirectly. Here’s how:
Consumers
When a company is drowning in debt, their first instinct is to try to make up the difference by squeezing more out of their revenue streams. That means you. Prices might go up, or you might notice an increase in aggressive upselling strategies. Companies might even cut corners on product quality to save costs. The debt burden trickles down, and ultimately, you’re the one footing the bill.
Employees
Were you blindsided by a sudden layoff? The truth is, it wasn’t a surprise to your employer. The financial data shows that many companies have been on the brink for months—if not years. A lack of transparency in the industry means employees are often left in the dark until it’s too late
Business Owners
This might hit closest to home. You’ve worked hard to build relationships, trust, and partnerships in the industry. But when a partner company goes under, they don’t just take their problems with them—they can take you down too. A sinking ship often drags its allies into the depths. It’s more important than ever to protect your business by knowing who you’re working with and understanding their financial health.
A Systemic Problem, Finally Uncovered
For years, the cannabis industry has operated in a fog of uncertainty. The lack of federal oversight and standard financial reporting has allowed some companies to amass staggering amounts of unpaid debt while continuing to operate as if nothing is wrong.
Now, with platforms like CCA finally shedding light on these financial realities, we’re beginning to see the full scope of the problem. Big players with massive debts are steamrolling smaller businesses, taking mom-and-pop operators down in their wake. And until the industry reckons with this systemic issue, it’s only going to get worse.
What Can We Do?
For a long time, there wasn’t much anyone could do. The industry was left in the dark, and the debt crisis grew unchecked. But now, that’s changing. At the Cannabiz Credit Association (CCA), we see all of you—consumers, employees, and business owners—fighting the hard fight with your boots on the ground. That’s why we’ve dedicated our mission to helping businesses in this industry address the debt crisis and create a sustainable path forward.
Other companies in the industry, who recognized the need to solve this issue, continuously share their accounts receivable (AR) data with us. This collaboration has given us the ability to provide exactly what the industry needs to fight back: credit reports with real, up-to-date data.
This is something Experian, TransUnion, and other credit agencies have chosen to ignore as the cannabis industry silently crumbled. But now, businesses have the tools to make informed decisions, identify risks, and protect themselves.
Consumers
You can make an immense difference. If you hear through the grapevine or see in the news that a company is deeply in debt, has committed a crime, or is operating unethically, choose to shop elsewhere. Support your local mom-and-pop dispensaries, try a new brand, and encourage your friends to do the same.
Here’s the truth: you hold a lot of power. The companies steamrolling the little guys got their power from you—not that you could have known what they’d do with it. But now that you do, you can take that power back. When you stop supporting businesses drowning in debt and destroying the industry around them, you weaken their ability to do harm. Your choices matter more than you realize.
Employees
If you’re hearing whispers that your company is in debt with other operators, it might be time to start looking for your next opportunity. Don’t wait until it’s too late. But remember this: it’s never your fault if a company goes under
Your skills and expertise have value, and there are great companies out there who will recognize that. Stay empowered, own your abilities, and move forward confidently.
If you’re in a position to help your company fix its debt, now is the time to act. Most companies they owe would be willing to work out payment plans. Taking steps to address the issue can save jobs and stabilize operations.
Business Owners
It’s not too late to protect your business. The CCA is here to support businesses like yours. By signing up and sharing your AR data, you gain access to real-time credit reports that help you make informed decisions about who you work with.
These tools allow you to identify risks, protect your cash flow, and ensure you’re partnering with businesses that pay their bills on time. You’ll be part of a movement to foster accountability and transparency in the cannabis industry. Together, we can stop the cycle of debt, protect small businesses, and build a stronger future for everyone.
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While consumers and employees play critical roles in shaping the future of the cannabis industry, the path to solving this crisis lies with business owners taking action. At the CCA, we’ve built the tools to help you make a difference. Join us, share your data, and let’s work together to fix what’s broken. The time to act is now.
Written On: 12/15/24
By: Nickole Neveu | VP of Operations for Cannabiz Credit Association