Member Exclusive, Online Lenders

With the cannabis market set to double, lenders hope to capitalize on the opportunity

  • Financing in the space typically has come in the form of equity investments.
  • Federal deregulation would give more lending options to cannabis businesses.

Email a Friend

With the cannabis market set to double, lenders hope to capitalize on the opportunity

With the cannabis market expected to double by 2025, the industry hopes to grow and operate without its hands tied behind its back. One of the biggest challenges is offering cannabis businesses a range of financing options that make sense for their growth.

George Mancheril, CEO of Bespoke Financial, a cannabis lending fintech, says that the cannabis market has grown leaps and bounds in the last 5-10 years, from legalization in a handful of states to 17 in 2021. New York was the most recent state to legalize cannabis at the end of March.

Despite the fact that two-thirds of Americans support the legalization of marijuana, the substance is still federally illegal. Consequently, most financial institutions that are FDIC-insured do not provide lending or banking services to the industry which prevents cannabis businesses from acquiring capital to launch and grow. Consequently, businesses sometimes rely on personal loans and investments. 

Matt Hawkins, founder of Entourage Effect Capital, a private investment firm, says the cannabis industry has no real low-cost lines of credit and no working capital lines that most industries have access to. This is where cannabis lenders come in, but Hawkins says that there are few of those to begin with. Most lenders in the space will commonly lend against a company’s assets, such as real estate, to act as collateral for the loan. However, private equity investment is the most common type of financing. Since EEC’s founding in 2014, the company has made 65 investments in the industry, 90% of which have been through equity or equity-like instruments.

This content is available exclusively to Tearsheet Outlier members.

Tearsheet Outlier information and signup Missing out? Subscribe today and you’ll receive unlimited access to all Tearsheet content, original research, exclusive webinars and events, member-only newsletters from Tearsheet editors and reporters and much more. Join Outlier now — only $49/mo. Already an Outlier member? Sign in to your account

0 comments on “With the cannabis market set to double, lenders hope to capitalize on the opportunity”

Member Exclusive, Online Lenders

Lending Briefing: GM, Marcus by Goldman Sachs and in-car shopping

  • In this week's Lending Briefing, GM and Marcus by Goldman Sachs launch a new partnership, products.
  • The tie-up provides some insight into new rewards programs as well as in-car commerce.
Iulia Ciutina | January 12, 2022
Member Exclusive, Online Lenders

Lending Briefing: The digitization of consumer lending

  • In our inaugural Lending Briefing, we explore the dynamic of moving further down the digital adoption curve.
  • Driven by mortgage and younger generations, banks are also improving their onboarding capabilities.
Iulia Ciutina | January 05, 2022
Online Lenders

Amex expands Nova Credit, Marqeta goes into credit, and the risk in B2B loans

Iulia Ciutina | December 10, 2021
Online Lenders, Podcasts

How Goldman Sachs leverages strategic partnerships to bring innovative products to consumers and small businesses

  • Goldman Sachs' transformation as a retail bank included both a DTC and partnership distribution strategy.
  • Managing Director Abhinav Anand joins us on the podcast to discuss the partnership evolution from the early days of Marcus.
Zachary Miller | December 08, 2021
Member Exclusive, Online Lenders

Grain is rethinking credit with loans based on active cash flows, and not credit history

  • Grain allows customers to attain a revolving line of credit through their existing debit card without issuing a physical credit card.
  • The firm wants to help customers with daily spending while allowing them to build a good credit score.
Subboh Jaffery | October 28, 2021
More Articles