What Illinois requires of cannabis and marijuana businesses
Illinois splits cannabis regulation between two agencies. The Department of Financial and Professional Regulation (IDFPR) licenses dispensing organizations. The Department of Agriculture licenses cultivation centers, craft growers, infusers and transporters. Both agencies require evidence of financial responsibility, and both accept a surety bond.
A dispensing organization must establish and maintain an escrow account or a surety bond of $50,000. A cultivation center licensed under the Compassionate Use of Medical Cannabis Program must provide a $2,000,000 escrow account or a surety bond naming the cultivation center as principal, on terms approved by the Department of Agriculture (8 Ill. Adm. Code 1000.40).
| Bond | Penal sum | Who files it | Obligee | Authority |
|---|---|---|---|---|
| Illinois Cannabis Dispensary Bond | $50,000 | Dispensing organizations | Illinois Department of Financial and Professional Regulation | 410 ILCS 130; 410 ILCS 705; IDFPR rules |
| Illinois Medical Cannabis Cultivation Center Bond | $2,000,000, reducible | Cultivation centers | Illinois Department of Agriculture | 8 Ill. Adm. Code 1000.40 and 1000.60 |
What the bond guarantees
The cultivation center bond defaults to the Department if the center fails to perform as its permit requires. The surety must be licensed by the Illinois Department of Insurance, the business name and registration number on the bond must match the Department's records exactly, a copy must reach the Department within 15 business days of selection, and the surety may not cancel on less than 30 days written notice. Under Section 1000.60 the Department will reduce the $2,000,000 by $500,000 as the center achieves each of a series of milestones, which can eventually eliminate the requirement.
Like every surety bond, this is a three party agreement and it is not insurance for the operator. If the surety pays a valid claim to the obligee, the principal must reimburse the surety under the general indemnity agreement signed when the bond is issued. Read how the different cannabis bond obligations work.
How we underwrite Illinois cannabis and marijuana bonds
This obligation is larger than, or worded more heavily than, a simple compliance bond, so it is underwritten on financial disclosure: the application, a current personal financial statement from each owner holding ten percent or more, current business financial statements (CPA prepared for the largest bonds) and a copy of your complete state or local license application. A cannabis bond is in substance an unsecured credit instrument. The surety extends its credit to you in front of the regulator, so financial strength, operating experience and the exact wording of the bond form drive both the decision and the rate. Where the numbers are thin, partial collateral can close the gap. No applicant is automatically declined.
More on cost, credit and collateral.
The parties to a Illinois bond
On a Illinois bond the principal is your licensed business, named exactly as it appears on the license or application. The obligee is Illinois Department of Financial and Professional Regulation, and on the other bonds listed above the agency, county or city shown in the table. The surety is an insurance company admitted in Illinois, placed by Surety One, Inc. as producer and underwriting manager. Who files in Illinois: Dispensing organizations ($50,000); Cultivation centers ($2,000,000, reducible).
Claims, cancellation and renewal in Illinois
If Illinois Department of Financial and Professional Regulation believes the bonded obligation has been breached, it makes a written claim on the surety. The surety opens a file, asks for documentation and notifies you, and you have the opportunity to respond and to cure. A valid, unresolved claim is paid up to the penal sum, and the surety then recovers that payment and its expenses from the business and the individual indemnitors. Because the Illinois obligation is large or carries performance, decommissioning or supply language, a claim can reach the full penal sum, which is why the indemnity agreement deserves the same attention as a personal guarantee on a loan.
Most forms let the surety cancel on written notice to the obligee, commonly 30 to 90 days. If a replacement is not on file before the effective date, the regulator can suspend the cannabis license. We send renewal notices 45 days ahead, and renewing at least 30 days early removes the risk of a gap.
Getting a Illinois bond issued, step by step
- Confirm the form and amount. Ask Illinois Department of Financial and Professional Regulation and Illinois Department of Agriculture for the current bond form and penal sum, or send us the license type and we will confirm them.
- Apply. Complete the online application. It collects the business details and the name, home address and Social Security number of each owner for a soft inquiry credit report.
- Send financial statements. Personal financial statements from owners of ten percent or more, current business financials and your license application let us quote in about three to five business days.
- Bind and file. Pay the premium and sign the indemnity agreement. We deliver the executed bond to you and, where it accepts electronic filing, to the obligee. Wet signature originals go out overnight.
Keeping a Illinois bond in good standing
- File and pay every cannabis tax and fee on time. Delinquent taxes are the most common trigger for claims.
- Keep seed to sale records reconciled to physical inventory, and document every destruction event with photographs, witnesses and waste manifests.
- Tell us before you change the business name, ownership, location or license type, so the bond can be amended by rider before the regulator notices a mismatch.
- Protect the personal credit of every indemnitor and keep quarterly financial statements. Both are reviewed at renewal.
Terms such as penal sum, obligee and indemnitor are defined in the glossary. Changes to Illinois and other state requirements are logged with dates in regulatory updates, and an underwriter is available through the contact page.
What to send us
- Cannabis license bond application
- Personal financial statement from each owner of ten percent or more
- Current business financial statements
- A copy of your complete license application
Send documents to Cannabis@SuretyOne.com or apply online. Confirm the current form and amount with the Illinois Department of Financial and Professional Regulation and Illinois Department of Agriculture before you file.
A note on vocabulary: cannabis and marijuana are the same plant and, for bonding purposes, the same business. Illinois law uses the term "cannabis". Operators look for this bond as a Illinois marijuana bond, a Illinois marijuana license bond, a Illinois cannabis bond and a Illinois cannabis surety bond. They are one instrument, and this site uses the words interchangeably. See marijuana surety bonds.
Primary sources
Official texts behind this page. We link to citation based addresses on legislature, code and agency sites because those are the least likely to move.
- 8 Ill. Adm. Code 1000.40 (Illinois General Assembly, JCAR)
- 8 Ill. Adm. Code 1000.60, evidence of financial responsibility (JCAR)
Illinois marijuana and cannabis bond questions
How does the Illinois cultivation bond step down?
Section 1000.60 lists operating milestones. Each one the cultivation center achieves lets it ask the Department to reduce the bond or escrow by $500,000. Four reductions take the requirement to zero.
Bond or escrow for an Illinois dispensary?
Escrow means parking $50,000 in cash for the life of the license. A $50,000 bond is normally written on the application and a credit review, and the cash stays in your business.
Is a Illinois marijuana bond the same as a Illinois cannabis bond?
Yes. Marijuana bond, cannabis bond, marijuana license bond and cannabis surety bond are different names for the same instrument. Illinois law uses the term cannabis, operators search under all of these names, and the bond form and amount are the same whichever word you use.
How much does a Illinois cannabis or marijuana surety bond cost?
You pay a premium, not the penal sum. The premium is a small fraction of the bond amount and depends on the size and wording of the obligation, your credit and your financial strength. Small compliance bonds carry low fixed annual premiums. Larger Illinois bonds are rated individually. Quotes are free.
Can I get a Illinois cannabis bond with bad credit?
Yes in most cases. Surety One does not automatically decline any applicant. Files with damaged or limited credit go to our non-standard program, which carries a higher rate and sometimes partial collateral.
Written and reviewed by C. Constantin Poindexter, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS, CPLP, CICS. Founder of Surety One, Inc., Cannabis Insurance Coverage Specialist, attorney and surety underwriter for more than thirty years. Author of The Contractor's Guide to Surety Bonds. View his cannabis insurance credentials. Last reviewed .