Marijuana Business Magazine March 2019

Marijuana Business Magazine | March 2019 52 interest in covering hemp. Establish a relationship with a broker who could alert you to a federal insurance change and participating insurers. Hemp farmers say they’re getting calls from questionable insurance agents offering coverage right now; don’t agree to anything before verifying the policy has USDA backing. BANKINGHELPONTHEWAY Fortunately for hemp businesses, banking and finance changes prompted by the Farm Bill are more certain. That’s because hemp cultivators, manufacturers and retailers can now access all the financial tools available to other small businesses—all without the dreaded federal 280E tax restrictions that bar marijuana companies from taking traditional business deductions. The change was immediate for Chase Terwilliger, CEO of CBDistillery, a Denver- based manufacturer of hemp-derived CBD. Roughly 20 banks rejected Terwillig- er’s company when he started it in 2016; after the Farm Bill’s signing, some of those same institutions called him back to offer accounts. And after years of fighting high-fee credit card merchant processors, who took 16% or more of every transaction, Terwilliger says he’s getting offers below 5%. “Our cash flow is finally back,” Terwilliger said. “We can hire more people, start to expand our workforce a little more as we prepare for even more massive growth.” The Farm Bill’s passage also is welcome news for entrepreneurs such as Jay Hartenbach, CEO of Medterra, a CBD manufacturer in Irvine, California. The Farm Bill opens a raft of opportunities for would- be hemp cultivators including marijuana growers and smaller, traditional crop farmers. But doing it well will require shrewd planning and savvy dealmaking. When mulling a foray into growing hemp, consider the following: • Ask for payment up front when making a deal to cultivate on behalf of another business such as a processor or a manufacturer of products like hemp lotions or CBD oils. • Research who you’re buying your seeds from and where they’re coming from. You want to avoid being duped into buying marijuana seeds or another undesirable type of seed. • Follow the wine industry’s lead and market your hemp with a focus on terroir, emphasizing how factors such as climate and soil can affect the quality of the plant. • Be aware that growing acres of hemp is labor intensive and will require more employees than the typical agricultural or marijuana cultivation operation. • Instead of shelling out big bucks to start a large operation, begin small so that mistakes won’t sink your business. “Do it small, and do it right” said Cory Sharp, CEO of HempLogic, a consultancy in Moses Lake, Washington. “The farmer has to control his own destiny.” LOCK DOWN YOUR MONEY Sharp recommends that a hemp grower who contracts with a processor should first secure in writing that the processor will pay at least $1,000 an acre for the crop. Next, the grower should get that money up front. If the customer isn’t going to provide you with the genetics—either seeds or clones—then add that to the cost per acre. Seeds can cost up to 80 cents apiece and clones around $4 per plant. Also, work out a deal to get a “kicker,” where, for example, you’re receiving an additional bonus of $1.50 per pound per 1% of the CBD you produce. If you’re contracted for $4.50 per pound for a CBD content of 3% but your plants come back at 4%, you should get an additional $1.50 per pound—for a total of $6 per pound. Make sure to get that in writing before your crop leaves the field. “Don’t get involved with somebody who just wants you to grow for them and they’re going to promise you all these riches at the end of the year,” Sharp advised. “Make them pay you up front.” AVOID SEED SCAMS Would-be hemp growers also need to be wary when securing seeds for their crops. In short, you want to avoid getting scammed. Two common scams for buyers of hempseeds are: • Seeds that are male rather than female. Female seeds create the flowers that hemp cultivators want; male seeds, by contrast, produce seed pods. • Seeds that are, in fact, marijuana—versus hemp—with a high THC content. Joe Frey, co-owner of Western States Hemp, a cultivation operation in Fallon, Nevada, sidesteps getting conned by making sure he knows the seller through a first- or second-hand source, such as a trusted business contact. CULTIVATION: The Do’s & Don’ts of Hemp Cultivation Day A New