(Reuters) - A coalition of cannabis firms, representing about 45% sales volume in California, on Tuesday started an effort to address credit issues that have plagued the state's legal cannabis market.
Cannabis operators including Kiva Sales & Service, Lowell Farms, Nabis, Sunderstorm launched Financial Stability for California Cannabis (FSCC) and issued a public letter in support of Assembly Bill 766.
The bill, dubbed "The Cannabis Credit Protection Act", seeks to establish regulatory safeguards around cannabis sales made on credit.
Most U.S. banks do not service cannabis companies as marijuana remains federally illegal, despite several states like California legalizing its medicinal and recreational use, leaving the industry largely cash-based and capital-limited.
"Collections and outstanding debt related to unpaid invoices are key challenges facing cannabis operators of all types across the state, from cultivators to manufacturers, vertical brands to wholesalers, and everyone in between," said Vince Ning, co-founder and co-CEO of Nabis, California's largest wholesale platform.
The lack of capital means that the cannabis sales across the supply chain are largely made on credit terms with license holders agreeing to pay for goods and services at a specified later date.
The bill, expected to be heard in California's Assembly Appropriations Committee on May 18, will establish maximum credit terms that cannabis licensees can sell on, and grant the Department of Cannabis Control oversight powers to ensure businesses pay for goods and services in a timely manner.
(Reporting by Arshreet Singh in Bengaluru; Editing by Shailesh Kuber)