Business is booming in the marijuana industry. Modest estimates put the industry’s economic impacts in billions of US dollars. This boon has attracted a lot of entrepreneurs into the industry.

On the other hand, government oversight is also on the rise. Many states are creating regulations to cover medicinal and recreational marijuana production and distribution, depending on which they legalize.

These regulations define how companies can cultivate and distribute cannabis-based products. It also affects other business aspects like facility, supply, and recording keeping.

The highlight of these regulations is the licensing requirement for any business interested in getting into the marijuana business. A major need for any business requiring this license is a cannabis license surety bond.

This blog will discuss a cannabis license surety bond and its requirements.

What Is a Cannabis License Surety Bond, and What Does It Cover?

A marijuana surety bond is a licensing requirement set by a state or municipality to enforce oversight over companies licensed to operate in the marijuana industry within its jurisdiction. This bond must align with state or municipality regulations.

Although cannabis surety bonds are common, some states allow marijuana-based businesses to operate without one. However, these surety bonds are becoming more common. Many expect other states to impose surety bonds requirements or similar regulations soon. It will help if you stay updated on state legislation that affects your business.

Regarding cost, a cannabis surety bond can be anywhere between $5,000 to $5,000,000. This amount serves as a financial guarantee that the paying business (officially called the principal) will abide by the licensing rules and regulations.

The state or municipality will have a claim on any business that goes against the terms of their bonds.

The surety will pay the bond amount to a state or municipality if they deem your claim valid. The company gets reimbursed by whoever defaulted, so you’re covered no matter what!

How to Get a Cannabis License Surety Bond

The licensing requirements differ from state to state. Municipalities will also have their needs in some states before any cannabis-based business can operate.

However, the three stages are uniform. These are:

• Application for a surety bond
• Credit check of the applying company
• Additional financial information for the company and all owners

The entire process is somewhat complicated because of the lack of a uniform policy between the federal government and states that legalized marijuana. These differing policies make the process of underwriting cannabis businesses complicated.

Furthermore, since municipalities can require businesses to operate a separate bond within their geographical areas, many companies are blind.

This is why you should get professional help when applying for a license. The professional will explain the terms of the bonds, help you through the process and help you stay compliant.

Parties involved in Marijuana License Surety Bonds

Three parties are involved in a marijuana surety bond like other surety bonds. These are the:

• Obligee – The Obligee refers to the state or municipality giving out the licensing. The obligee creates the terms of the bond and can file claims against the bond when the principal defaults on the words. In states like Los Angeles, the state and municipalities have different bond requirements. Marijuana businesses will have to get separate bonds for the state and the city they operate.
• Principal – The principal is the company applying for marijuana licensure. It has the ultimate financial responsibility for any payment made to the surety.
• Surety – The surety is the company providing the financially backed assurance to the obligee that the principal will act within defined terms. The surety is the one that examines any claims made by the obligation and will make the payment if the principal refuses to pay.

Our insurance focuses solely on the marijuana sector so that we will know a great deal about testing laboratories, cultivation facilities, medical marijuana, cannabis surety bonds, and other critical details within the industry.

OG Cannabis Insurance is here to help you with your cannabis surety bond. Reach out today, and we’ll be happy to provide all of the information you need!

The Benefits of Having a Cannabis License Surety Bond

There are many benefits a marijuana-based business will enjoy with a license surety bond. Some of them are:

• License

  We are serious here. Without the surety bond, your business won’t get a license, so this is a benefit.

• Investment

  Your business is better positioned to attract legitimate investment if bonded. Furthermore, other companies and creditors will be willing to do business with you when they learn you are fiber-connected.

• Higher Standard

  The surety bond is a financial incentive for you and your business ownership to perform at a high standard. Look at it as a reason to be the best in your field.

• More Business

  Ethical marijuana users and suppliers will prefer dealing with a licensed marijuana business, so they don’t get into problems with the government.

Our experts understand marijuana surety bonds, surety bond requirements, and cannabis bonds in general. If you have questions or concerns about bond forms, cannabis insurance, bond amount elements, business types, and more, reach out to our surety expert team at OG Cannabis Insurance today.

Need Help with Cannabis License Surety Bond for Your Business?

OG Cannabis Insurance provides in-depth, timely, and personalized insurance-related business advice and insurance services to businesses in the cannabis industry. If you need help applying for a license, understanding the regulations relating to your business, or complying with city or state regulations, give us a call.

Our experts are seasoned and have what it takes to help your business.

We are here to ensure that our clients in the cannabis industry can succeed. We know that the cannabis sector has various regulations and a comprehensive licensing process to conduct business.

Whether it is a medical marijuana business, a general commercial cannabis business, or even something as seemingly benign as a cannabis-infused edibles business, it is necessary to consider the risks involved. That is where our firm, with our surety bond experts, step in and make a difference.

We focus on the risks and offer cannabis insurance products so you can have the right coverage as you seek to move forward in your cannabis-related business. Call us at (877) 473-7979 to request a quote!