It’s no secret that there’s a serious lack of funding sources in the emerging cannabis industry. Despite explosive growth and the majority of states enacting reform, the continued federal prohibition of cannabis prevents financial institutions from providing services to operators within the space. This creates quite the challenge for companies looking to grow.
Canna Business Resources aims to rectify this issue by offering a wide range of funding options to plant-touching and ancillary companies alike. The firm provides both secured and unsecured loans as well as working capital, equipment or real estate financing, and accounts receivable lines of credit. But more importantly, CannaBusiness Resources is focused on relationships, helping their partners evolve their operations and achieve success.
Learn more about Canna Business Resources and what sets them apart in this exclusive Leafwire Q&A with Michael Tew.
Leafwire: What is Canna Business Resources and how did you get into the cannabis space?
Michael Tew: CannaBusiness Resources provides business services and lending to business operators in every state and every market in the United States — and only in the United States. I’m the lead underwriter on the lending team. I help underwrite and analyze and review every single transaction that comes across our desk. We are currently originating about $30 million per month in lending transactions.
We are a family office. We started back in 2008, during the financial crisis. The family that started CBR was lending to small businesses in primarily the tri-state New York area under the name TVT Capital. They grew that into a multi-hundreds of millions of dollars lending business over the last decade, and then in 2018, they saw the opportunity in cannabis. These are the very same types of small businesses that could not access banks in the financial crisis. The underwriting of the analysis is similar, except you have all these really interesting and unique cannabis nuances.
LW: How does Canna Business Resources financing structure differ from traditional investment?
MT: There are investment firms that provide lots of access to what I’ll call investment capital, right? There’s the Poseidons of the world, the private equity groups, but there’s still not enough of them. There’s just not enough capital in the space. That presents opportunities, but it also presents challenges. One of the challenges is that private equity firms provide growth capital and private equity capital, but they don’t provide day-to-day working capital that banks or other lenders usually would. And that’s exactly the type of capital resource that cannabis companies need.
For example, let’s say harvest season is coming up and a manufacturer needs a million bucks to go buy bulk flower because they’d be getting them at a 40% discount over financing with the cultivator. You’d rather pay a significant interest rate on that capital because you’re still saving money, rather than paying a higher price at the pump so to speak, to pay the cultivator to finance it for you. You’re better off borrowing that money and paying upfront, because you can have control over your inventory, have control over pricing and margins. And you don’t have to chase the dollar every day to pay it off. We provide that type of working capital that just doesn’t exist in the industry at this point.
LW: What sets Canna Business Resources apart from potential competitors?
MT: I think what makes us unique is we look at on-the-ground operators every day. Big, small, medium-size whether they’re acquiring retailers, or a cultivator building out a new facility, and they need a million or two for that over a 12 or 18 month period. We can tranche it out. Here’s a half-million today, here’s another half-million in six months. Nobody does that.
We actually set it up so that the loan packages are bespoke to the borrowers. So we can tranche it out. We can do it all at once. We can structure it anyway that’s effective for the borrowers, which is extremely uncommon at this point.
LW: What advice do you have for entrepreneurs looking to enter cannabis?
MT: First of all, it’s not cheap — and do not nickel and dime, you’ll lose. This is not a cheap industry. It’s incredibly competitive. Particularly for licensing. It’s a lot of limited license markets, but the unlimited license markets are even more competitive. You have MSOs eating the world.
My advice is you dive in headfirst, but you have to realize that it’s not going to be easy. Having passion is a prerequisite. Having the business acumen, all that stuff is a prerequisite. But you need a nest egg. You need the ability to operate a business in an all-weather environment.
LW: What should Leafwire readers know about Canna Business Resources?
MW: We’ve recently opened our investor group up because we just can’t keep up. We have a technology platform with real-time data and analytics. We want to open our doors up to more investors that have an interest in learning about what we do and how we can help the industry further.
We have a lot of resources that we can access. We have unsecured lending. We have secured loans, and equipment lending. We also have real estate lending. And we have our financing like accounts receivable factoring and lines of credit for that as well. We know every part of our client’s business because we lend into different for different reasons, different structures and that’s how we develop relationships.
We reinvest with our clients all the time. It’s a great model for us actually, because we already know who they are. They know us. We’re basically betting on our friends. And if things go sour, we restructure. Because we know that when things recover, they’ll come back to us again.
“Well, hey, you guys just gave me some startup money for this new facility. I got my dispensary up and running. Now I’m going to go buy this grow facility, but I’ve got the real estate, I need the money, I need the equipment.” We’ll look at that too and say, “Okay, great. Yeah, that’s a good idea. Go vertical. Here’s the money for that.”
We help these businesses actually grow, we don’t just write a check for them, and then suck the cash out of them. There’s always a goal in mind.