Who Can Still Borrow in Cannabis? The Cash Flow Test Separating Bankable Operators From the Rest

For years, cannabis operators have insisted that capital has dried up. But recent moves by Curaleaf and Vireo suggest a more complicated reality. Curaleaf’s proposed acquisition of Aurora shows a well‑capitalized operator buying what it sees as a distressed asset. Vireo’s expansion, meanwhile, highlights a lender with the balance sheet to fund a roll‑up strategy.

Peter Su, a senior banking executive at First Central Bank in New York who has built multiple cannabis banking programs, says these deals reveal a simple truth.

“Who can borrow? Who can raise money? Those that can, those that qualify for it,” he says in an online interview with IgniteIt.

Su argues that the idea of a capital desert is often a matter of imprecise language. Many operators who say there is no money available are really saying there is no money available for them. In markets like New York, he says, the challenge is often less about cannabis and more about the realities of startup financing. Whether a business is buying a dispensary or a liquor store, early‑stage capital is hard to secure.

What Lenders Actually Look For

Cannabis operators often talk about capital as if it were governed by mystery or luck. Su says the reality is far more straightforward. Banks and credit unions that lend in the space are looking for the same thing they look for in any other commercial vertical: proof that the business can support the debt.

“Most banks and credit unions are cash-flow lenders,” says Su. “The company makes X; it can afford Y.”

That simple math drives most underwriting decisions. Lenders want to see consistent performance, reliable revenue, and enough free cash flow to service a loan. Su notes that only a fraction of the financial institutions banking cannabis are actually lending, and most of those lenders are small institutions. That means the available capital tends to come in the form of modest lines of credit and term loans rather than large, transformative financing packages.

Operators who can demonstrate steady cash flow and disciplined financial management remain eligible for credit. Those who cannot often find themselves shut out, regardless of market conditions.

Cash Management And The Receivables Trap

Cannabis operators continue to struggle with cash management, but Su says the issue is less about mistakes and more about structural limitations. With lending constrained and few traditional financial tools available, many businesses are forced to fund operations entirely through their own revenue. That leaves companies exposed when sales slow, or receivables stretch out.

Su points to the industry’s receivables cycle as a core weakness. Without access to working capital lines, operators cannot bridge the gap between purchasing inventory and getting paid for it. In other sectors, companies draw on a line of credit, buy product, sell it, and repay the line. In cannabis, that cycle often breaks down. The manufacturer or distributor becomes the de facto lender, creating a chain of obligations that is difficult to unwind.

He says this dynamic is one of the biggest reasons operators struggle to maintain healthy cash flow. It also makes lenders cautious, as a business with chronic receivable delays is less likely to demonstrate the steady performance required to qualify for credit.

Working Capital And The Separation Of The Bankable

Su says the industry is beginning to show a clear separation between disciplined operators and those struggling to keep up. Some companies manage to grow both top and bottom lines even under 280E. Others cannot.

“You’re starting to see the separation of the bankable and the unbankable.”

He notes that this pattern is normal across all industries. Strong operators continue to grow, while weaker ones struggle or fail.

Debt Decisions That Haunt Companies Later

Su sees many operators asking lenders for capital when they really need investors. In other cases, companies seek bank loans when their deals require private or specialized lenders. He says roughly 90% of the calls he receives fall into one of those categories.

He also sees companies burdened by expensive private debt taken out during earlier phases of growth. In some cases, the debt was necessary to build the business. But as markets shift, those obligations become unsustainable.

“They borrowed like fifteen million dollars at twenty‑five percent interest,” he offered as a typical scenario. “The math worked at two thousand dollars a pound. At one thousand dollars a pound, they went straight into insolvency.”

The problem, he says, is that many operators never stress‑tested their models. When prices fell, the debt became unmanageable.

Acquisition Financing In A Tight Market

Acquisition financing remains difficult. Banks lend based on historical performance, not projected growth. That means most acquisition deals require creative structures using cash, stock, SAFE notes, or private capital.

Su says he routinely sees small operators using sophisticated structures more common in private equity.

“I was shocked to come into cannabis and see very similar structures,” he said.

These arrangements often involve multiple LLCs, GP‑LP relationships, and complex equity waterfalls. They can be expensive to create, not always in dollars but in equity and long‑term obligations.

From a bank’s perspective, Su says clarity matters. If a deal requires multiple attorneys and consultants just to explain, it is unlikely to be approved.

“The harder it is to understand for you, the harder it is to understand for me.”

What Rescheduling Would Actually Change

If cannabis moves to Schedule III, operators will see a dramatic improvement in free cash flow. Su says that change alone could make the difference between qualifying for a loan and being denied.

“The impact of freeing up free cash flow cannot be understated,” he noted.

But he cautions that rescheduling itself does not fix cannabis banking. The current system relies on FinCEN’s 2014 guidance, which is built on the Cole Memo. That framework assumes cannabis is a Schedule I substance. Under Schedule III, it breaks.

“Cannabis banking as it currently works today would break once you move to Schedule Three.”

Schedule III substances require a doctor’s prescription and FDA‑approved products. Su says almost no cannabis operators could comply with those requirements immediately. Without new guidance or legislation, banks would have no clear way to serve the industry.

A Market Defined By Discipline

Su’s perspective is clear. Capital, lending, and acquisition financing are all available to the cannabis industry. But access is limited to operators who can demonstrate discipline, clarity, and cash flow.

“Some are doing fantastic,” he said. “Some are living under 280E the same conditions as everybody else, but they manage to turn a profit year after year.”

As the industry continues to mature, that separation is likely to widen. The companies that qualify for capital will continue to grow. Those that cannot will face increasingly difficult decisions about debt, structure, and solvency.