How Purchasing Technology is Solving the Cannabis Finance Problem

Cannabis financing is one of the most difficult aspects of the industry for operators to navigate – and with recent global financial struggles plaguing a variety of industries, accessing plant-friendly capital isn’t getting easier. is uniquely positioned to remedy this issue by providing secure financing options for business owners throughout the retail and cultivation spaces by streamlining the entire buying process from early phases to scaling.

Leafwire sat down with’s Head of Embedded Finance Warren Brown to discuss the limited number of options that cannabis businesses have for capital, recent changes in industry pricing, and how continuously creates solutions for shifting and growing needs.

Leafwire: What are some of the biggest setbacks that cannabis businesses face when it comes to financing and accessing capital?

Warren Brown: A lot of cannabis businesses are startups, or still in their early stages of development, and they might have barely any cash flow – or even negative cash flow. A lot of banks will lend to profitable businesses, but for early operators, they’re less likely to want to help out.

There’s also that stigma that’s still attached to the industry, and this definitely still applies for many banking organizations. The reality is: banks who understand the rules and regulations of cannabis are more willing to lend and provide capital, but a lot of folks are still uncomfortable. 

That forces cannabis companies to self-fund, which slows down growth – or, they have to raise equity in order to grow. Three or four years ago, raising equity was new, exciting, and fairly easy. A lot of equity capital wanted to get into cannabis. But that rush has since cooled off.

That’s where alternative capital providers come in and make a difference – players like us who provide a core service and embed access to capital as part of that service. 

LW: What sort of aspects of business are cannabis operators typically looking to finance?

WB: That varies depending on whether you’re working with a dispensary or a cultivation facility. But in general, opening new locations requires a big capital demand. We see dispensaries investing in remodels, delivery vehicles and equipment, or even just marketing campaigns. Bigger operators might want to spend $100,000-$200,000 for one digital marketing push.

On the cultivation side, it can be anything from installing a new kitchen or adding a new room to upgrading their harvesting technology or launching new products. 

LW: What sort of options do cannabis businesses currently have for secure capital?

WB: A small number of banks will be willing to lend, but they tend to only want so much of their portfolio in the cannabis space, so they’ll max out at a certain limit. In general, the choices are: a select group of banks, private finance companies, and equity markets. And then, players like us: embedded capital providers. 

LW: How have recent changes in global finances affected financing options for cannabis?

WB: It’s still early days, but we can look at mature markets and deduce that price pressure means we’re seeing some consolidation, and will likely continue to see that trend. In Colorado or California, for example, we see some turnover in the number of dispensaries available, or square footage of those locations.

That means capital providers need to be thoughtful about where they’re investing, and ensure to look at folks who are doing well. That’s one of the advantages for embedded capital providers. We’re not just providing capital: we’re helping people manage their daily spend. Because of that, we have a unique insight into who’s doing well and who isn’t, and we can make better and faster decisions about who to finance. 

LW: What sort of long-term effect do you think these global financial setbacks will have on the industry and its capital options?

WB: Personally, I think it’s structural. While cannabis is still state licensed and federally illegal, we’re creating these small, sub-scale markets. As an operator, you have to have your production and distribution local within your state, but when we get to a place where cannabis can cross state lines, those locations might change. People will be more likely to optimize around the best environments to grow in, and will also be able to transport their products farther. 

LW: What sort of solutions does provide the cannabis industry when it comes to financing and buying?

WB: We simplify the end-to-end buying and fulfillment process for businesses (including dispensaries and cultivators) and vendors – folks who sell to those businesses. 

We make it fast and easy for dispensaries and cultivators to get all of the things they need to run a business. On the flip side, if you’re an accessory, packaging, or grow supplier, we can help you access more customers and process your orders more efficiently.

We work with over 200 dispensaries and cultivators to help them spend around $7-8 million per month, across 4,000 different vendors per day. Through that process, we’ve quickly learned about the opportunity to embed financing in that process. We basically offer folks four different vehicles for accessing forms of capital:

  1. We offer our customers the option to consolidate all of their vendor purchases on one invoice, and then give them 30 days to pay that total bill. That option is free and included with our platform, and we’ve found it to be super powerful – especially in the cannabis industry, where many payments are net 1. If you’re stocking up on product, handling digital marketing, etc., pushing out that payment by 30 days can help you better align your expenses as revenue comes in.
  1. Our second option is extended terms, for anyone who needs more than 30 days to pay that bill. We can extend our terms by an additional 30-60 days for a small fee. And rather than business owners having to negotiate individual terms with 50 different vendors, they’re able to easily come to us, make one request, and all of that spend gets moved into whatever time period they need. 
  1. The third option, which we just launched, is our cash advance product. This is for anyone who needs to access capital and back it back over a 6-12-month period. We’ll do a quick underwriting on the business, approve them for up to $500,000, and they’re able to take that money, invest it, and pay us back over a 6-12-month period as a percentage of monthly revenues.
  1. Our last option is targeted more at vendors: mid-sized vendors in the space whose customers want to pay them on net 30, 60, or 90. Mid-sized businesses may struggle to agree to these terms because they have to spend money upfront to produce their product, and this can make cash really tight for them. 

Because of this, a lot of vendors have to turn away business because they can’t offer these net rates to customers. That’s where we come in. We offer net terms as a service, so the vendor will bring that customer to us, tell them to order their product or service through our platform, we pay that vendor net 1, and the customer pays us net 30, 60, 90, or whatever we’ve agreed to.

This allows vendors to win deals they might otherwise lose, while also growing revenue that doesn’t tie up the balance sheet in the interim.

LW: What makes unique from other cannabis financing solutions?

WB: We’re pretty deeply embedded with our clients. Whether they’re MSOs or single location operators, we’re helping them manage what they buy on a daily or weekly basis. It’s a lot easier for us to understand businesses and make decisions on credit extensions when we have that deep relationship, versus a finance company coming in from the outside and starting that relationship by offering credit.

Companies like that they’re using our benefits while building credibility, and increasing that ability to access reliable capital. We’re big believers in the combination of being the embedded software that people use to run businesses and manage spend. It makes things a lot easier for us when it comes to delivering capital, and it’s a powerful win-win.

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