In most situations, it’s fairly easy to get approved for a loan for a used vehicle. Despite the fact that most banks will not give you a loan for a car older than four or five years, anybody in decent financial standing shouldn’t have too much trouble with the approval process.
However, when Melissa Johnson bought a used Kia Soul in Bend, Oregon, she was shocked to receive a call a week later stating that her financing request had been denied. But it wasn’t because of her financial situation — it was because of her place of employment. Johnson works in a customer service position at a retail marijuana shop in Bend.
The dealership sales staff declined to comment on the story but did attempt to find a solution for Johnson.
“They assured me that they’d work with me to keep me in the car,” she said. “The head guy kept on it until they found someone who’d work with me, but at a higher interest rate and a higher payment.”
Although marijuana is legal in Oregon, it’s still criminalized under federal law. There are 5,338 U.S. commercial banks, and most of them are federally regulated. That means that they’re often quick to dismiss marijuana businesses as too much of a risk.
Surprisingly, this isn’t an isolated case. It’s becoming more and more common for federal banks to deny loans to people who work in the marijuana industry, from growers and processors to wholesalers and retailers. The difference is that it’s the larger banks, such as Wells Fargo and Bank of America, that have a problem giving out loans to these employees. With smaller credit unions, it’s usually not a problem.
“It is currently Wells Fargo’s policy not to provide auto loans or mortgage loans to employees of marijuana businesses,” wrote Portland bank spokesman Tom Unger in an email. “We are a federally charted bank, and based on federal laws, the sale and use of marijuana is still illegal.”
Credit unions, however, are much more lenient.
“If you have W-2 income from a dispensary or some other marijuana-related business, that’s OK,” said Bill Anderson, CEO of Mid Oregon Credit Union in Bend. “It’s the business itself we have a lot of trouble with.”
Anderson is absolutely right. A typical bank loan borrower looking to take out a business loan has to be two years in business, have at least $250,000 of annual revenue, have good personal and business credit, and be cash flow positive. However, even if all of these requirements are met, business loan applications for marijuana businesses can still be denied.
“Cannabis consultant” or customer service representative Travis Eno works at the same dispensary in Bend for about 20 hours each week. As a former Marine who has seen two tours in Iraq, he, too, was initially denied for a loan last year when he tried to buy a used pickup truck.
“They ran the loan application through 30 different finance agencies before they found one,” he said. “We talk so much about the good things in the industry, but there’s a dark circle around the people in it.”