Q&A: What Capital Sources Look for When Providing Financing to Cannabis Companies
For cannabis companies seeking financing, it can be difficult to understand what factors lenders consider when evaluating a business’s eligibility. In this interview, Andrew Lines, MAI, and a valuation partner at CohnReznick, and Tony Cappell, managing director and head of underwriting at Green Ivy Capital, provide insight into how the market makes decisions on lending to cannabis companies.
How should cannabis companies weigh their financing options?
Drew: We come across a lot of businesses in the early-stage startup phase. They have cash, though often they’re still not profitable. We’ve also seen companies that have a pitch deck, a good board, and have raised $1-2 million. They have a plan to begin operations, but they need more capital than they can raise from family and friends, so they have to go to market.
Other companies are ready to scale. They’ve got a traceable history, good tax and financial records, customer relationships, and brand recognition. They’re more attractive.
Established companies need enough capital to deploy a large strategy. They should have gotten their cash from U.S. or Canadian banks, but due to federal restrictions, they had to go to Canada to IPO/RTO. You can’t become a multi-state operator, build testing labs, or invest in R&D without lots of capital. [Read More @ Cohn Reznick]