With the current economic volatility and interest rates rising, it’s important credit unions monitor the risk levels of their lending portfolios and prioritize diversification of their assets. There are many ways CUs can diversify their portfolios, but one in particular stands out. Cannabis real estate lending is an emerging space that’s proving to be a powerful market for lenders.
For a credit union that wants to expand its loan program to include cannabis financing, partnering with a CUSO like Extensia Financial can make the process far smoother and more productive. We provide the expertise and external support that credit unions need to take on new CRE loans and serve more members.
In short, there’s a significant opportunity for credit unions to benefit by tapping into cannabis lending.
The Opportunity for CUs Within Cannabis Lending
The continued legalization of recreational cannabis use across the U.S. is fueling the development of cannabis businesses. With everything from building greenhouses and dispensaries to purchasing highly specialized equipment, working in cannabis is an extremely capital-intensive industry. For CUs, the opportunity lies in the fact that traditional real estate financing does not currently fill the need.
While cannabis still remains restricted under the Controlled Substances Act, major banks remain inactive when it comes to cannabis lending. Conversely, federal- and state-chartered credit unions are stepping up to fill the void in the market with legal and competitive financing opportunities.
Why CUs Should Invest in Cannabis CRE
The U.S. cannabis market size was valued at $10.8 billion by the end of 2021, with an expected CAGR of 14.9% from 2022 to 2030. Therefore, the opportunity will continue to grow for credit unions that expand their lending solutions to include cannabis real estate loans for dispensary construction and other facilities cannabis operators require to be successful.
The Co-Founder and Chief Lending Officer of AVANA Companies (the parent company of Extensia Financial), Sanat Patel, had the following to say about the potential for credit unions within cannabis lending:
“When thinking about the cannabis industry’s growth trajectory coupled with the ongoing volatility in the markets, credit unions can benefit greatly by adding a cannabis financing option to their loan products. In addition, that fact federal banks can’t tap into this is essentially gifting CUs with a lucrative opportunity. All this adds up to giving credit unions greater diversification within a newer industry that’s thriving – and will continue to thrive. There’s security in that.”
Cannabis Real Estate Lending with Extensia Financial
On the whole, the upward potential present in the cannabis industry is not going anywhere anytime soon. While cannabis remains restricted on the federal level, credit unions in states where it’s legalized have the upper hand over national banks to start now and own a larger market share in the long run.
Credit unions can establish long-term relationships with cannabis entrepreneurs and business owners as their industry continues to boom. To help nurture those relationships, CUSOs such as Extensia Financial provide credit unions with the back-end support and top-tier service they need to efficiently add and fund new loan products, all while creating a broader membership base.
Cannabis Insider Tip: Another partnership opportunity is with our sister company AVANA Capital, which offers cannabis business loans that give entrepreneurs in the cannabis industry the funding needed to navigate the intricacies of the cannabis industry.
About Extensia Financial
Established in 1998 and headquartered in Simi Valley, CA, Extensia Financial is one of the most seasoned credit union service organizations (CUSO) focused on commercial real estate lending. For decades, we have partnered with credit unions across the country to offer competitive and collaborative CRE loans. We also uniquely support and guide our partners through the entire lifecycle of our loans. Extensia Financial is a proud member of the AVANA Family of Companies.
Contact us today to learn more about becoming an Extensia Financial partner.