By Mark Goldfogel
While the banks are turning a blind eye to cannabis businesses, private investors are flocking at the opportunity to invest money — and many don’t want equity.
Scott Jordan of Dynamic Funding is one of the first to focus on two-year or older cannabis businesses. He said he has secured private capital lending to the industry at risk comparable interest rates to normal industries. According to Scott, he has closed over $5 million in the last quarter alone!
Many start-up businesses have to give away significant equity to raise the capital to grow. And while banks show little interest in lending to this industry, private money is hyperventilating at the chance to get in on the ground floor of this smoking hot business.
Scott is a very busy man these days because many two or three-year old businesses are running into a cash crisis to fund their next stage of growth, or even to pay off end of the year tax liabilities. With the inability to write off expenses thanks to tax code 280E, some businesses might be caught off guard at year’s end.
What a normal business could handle with a line of credit, this industry must stockpile in cash. This is both dangerous and difficult.
The biggest requirement for these kind of loans is excellent financials. Another company that has come in to fill that void is TGG Accounting Colorado.
Greg Wilson opened his office in Boulder, Colorado focused on helping cannabis businesses get their financial act together so they can provide the documentation necessary for private investors and funders. The firm does not provide traditional CPA services, but rather, ensures accurate internal financials for investment, acquisition, and funding. Greg and his team help guide business owners to achieve their goals through excellent financial management.
Another source of funding will be The Fourth Corner Credit Union, the first and only industry-focused credit union. They have their state charter in Colorado and are awaiting their Federal Master Account, which appears to be only a matter of formality according to Mark Mason, who has worked to organize the credit union. The Fourth Corner Credit Union is developing a number of loan product offerings custom tailored for the Cannabis Industry.
And while all of these resources are available for established businesses, The ArcView Group, lead by Troy Dayton, provides a matchmaking service for qualified investors and startups that are looking to share equity for investment. According to their website, they have invested $17 million and funded 34 companies. I was the first presenter in history to this organization and can attest to their professionalism and effectiveness.
All of these resources have sprouted up over the last five years, and the industry is blooming thanks to the dedicated efforts of a few leaders focused on helping the industry find the funding it needs for success.