Optimism in Connecticut is beginning to fade as the industry faces a slow and challenging rollout, with only a fraction of licensed businesses fully operational.
As of Nov. 1, the state’s online licensing database showed that 55 cannabis companies are waiting for licenses. Forty have received provisional licenses, according to the Hartford Courier.
However, only 10 businesses – seven dispensaries, two growers, and a delivery service – are operational or nearing operation.
Experts point to a multitude of hurdles contributing to the sluggish start of the industry.
“In a normal business in a free capital market, you’re going to see businesses close unfortunately, or get 50% of the way there and say ‘nope, not for us,’” Drew Richards, a CPA at accounting and consulting firm Marcum, told the outlet.
The challenges include stringent regulatory processes, limited capital availability, scarce real estate options, and the broader economic climate.
Several factors have caused many prospective business owners currently in the licensing pipeline to reconsider or abandon their plans. These challenges include:
Stringent regulatory processes
Limited available capital
Scarce real estate options
The broader economic climate
Access to capital remains one of the biggest barriers, especially for startups that are not allied with larger, multistate cannabis companies.
“When you’ve got somebody who’s linked up as an (equity joint venture) with another company … they’re getting up and running a lot quicker because they’ve got capital behind them,” Megan Budd, a CPA and principal with Withum told the outlet.
To address those funding woes, the state’s Social Equity Council introduced the Canna-Business Revolving Loan Fund with an initial $10 million allocation, aimed at providing low-interest loans to licensed social equity cannabis business owners.
Still, a spokesperson with the Social Equity Council told the Hartford Courier that the agency had yet to issue any loans as of November. The ongoing financial challenges led lenders and tax advisors in the state to predict a slew of companies entering receivership soon, according to CT Insider.
Another major obstacle is the real estate market. Municipalities having the authority to restrict or ban cannabis businesses, so finding suitable locations can be a daunting task.
Nicholas Morizio, a commercial real estate broker with Colliers International, said the challenge of securing properties that meet the specific needs of cannabis businesses is compounded by rising costs in the real estate market.
The licensing process itself, managed by the state Department of Consumer Protection, is also part of the equation. While some businesses have up to two years to get fully licensed, the process has been complex and slow-moving.
“Complying with the state’s requirements to actually get up and running is difficult, it’s costly, and they’ve been given a limited amount of time to do it,” Attorney Ian Butler from Glastonbury-based law firm Brown Paindiris and Scott LLP told Hartford Courier.
Despite the challenges, the industry’s potential remains high. Experts and state officials anticipate growth and stabilization as the market matures and businesses navigate the initial hurdles.
A local Hartford councilwoman and adult-use licensee, Tiana Hercules, recently told Green Market Report that her business plans have spent a bit of time in this limbo.
“I mean, we’re kind of keeping our eyes on our own paper, trying to move forward and trying to be one of the first of this new kind of class of growers to market, so I think we’re positioned to do so,” she said. “But as you know, there are lots of crazy things that can happen in this industry. So yeah, we’re just chugging along on the path we set forth.”
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