By 2020, the legal marijuana market in the U.S. is expected to top $20 billion (a nearly 200% increase over 2016) while creating an estimated quarter of a million jobs, Forbes reported recently. That’s more than the expected job growth from manufacturing or utilities, according to the Bureau of Labor Statistics.
“Cannabis is a major economic driver and job creation engine for the U.S. economy,” said Giadha Aguirre De Carcer, Founder and CEO of New Frontier Data, which specializes in cannabis industry analytics.
Despite the cannabis industry’s smoking fast growth, its entrepreneurs face many of the same challenges as owners of fast-growing but less risqué small businesses: They can’t access the financing they need to expand. That’s why Fundamental Financial specializes in delivering specialized growth capital solutions where banks and other institutions don’t. And that includes the legal cannabis industry.
“Most banks won’t even open checking accounts for marijuana businesses, much less lend to them. And with no change in federal law in sight, that’s not likely to change, said David Dinenberg, chief executive of Kind Financial in the LA Times. Dinenberg’s company makes marijuana tracking and compliance software to streamline sales in legal markets. “If everything stays the same as it is today, I don’t see the typical bank lending for some time. Access to capital is not one of the easier things in this industry.” Dinenberg said.
Fundamental is different. For legal cannabis businesses with eligible collateral, we offer a full range of working capital lending solutions. And our direct partnerships include close collaboration with our principals and guidance from our expert team of portfolio managers.
Despite less than friendly signals from Attorney General Jeff Sessions regarding federal Marijuana policy, we’re optimistic about the legal cannabis industry on the state level. Recently, four more states (California, Nevada, Massachusetts, and Maine) passed legislation decriminalizing recreational use, adding to an already healthy list of states where cannabis can be enjoyed without worry of legal troubles. Add to that a growing audience of mainstream marijuana users: nearly 10% of Americans had smoked marijuana at least once in the past year, accounting for 30-plus million people or slightly more than the total population of Texas, according to Vice.
But the real proof of cannabis success is north of the border where medical marijuana has been legal since 2000, and recreational cannabis is expected to become completely legal by 2018.
Meanwhile in Canada: Working Capital Works for Cannabis
Deloitte estimates that Canada’s legal marijuana market could surpass $22 Billion upon national legalization as early as this year. Perhaps no other company is better poised to capitalize than Canopy Growth Corporation, a Canadian holding company that trades on the Toronto Exchange under the ticker name WEED. Now valued at nearly $1 Billion, Canopy claims to be the largest legal weed producer in the world. Its massive vertically integrated operation is based out a former Hershey’s Chocolate factory near Ottawa.
Canopy recently closed on a $5.5 million financing deal via a commercial lending institution including a term loan and a revolving loan. The facilities, secured by a first charge mortgage, will be used to refinance building construction and purchase equipment.
"These new facilities strengthen our financial position and enable Canopy Growth to continue driving forward an aggressive expansion of our operations that we believe is necessary to help meet future cannabis market demand," said Bruce Linton, Chairman & CEO of Canopy Growth. "We are very pleased with this second round of financing seeing as it is the first time that a commercial lender has entered into multiple credit agreements with a Licensed [cannabis] Producer."
If there’s any doubt about how the right capital can seed massive growth, check out Canopy’s numbers:
“Double-digit quarterly sales growth with revenue of $9.8 million, a 15% increase over second quarter fiscal year 2017, and an 180% increase over the prior year period.”
Financing Homegrown Success
Back in the U.S., even more states may soon legalize marijuana for medical and recreational use. And medical cannabis is gaining increasing acceptance as a treatment for serious health problems including neuropathic pain, severe muscle spasms associated with multiple sclerosis, unintentional weight loss, and the side effects of chemotherapy. That’s why we look at legal cannabis as an industry with incredible potential for entrepreneurs - entrepreneurs we’re eager to empower.
“President Trump has promised Americans a thriving economy, and the cannabis businesses play a key role in 28 states,” National Cannabis Industry Association executive director Aaron Smith told Forbes. "State-legal cannabis businesses generate billions of dollars in economic activity and support tens of thousands of good-paying jobs.”
Fundamental Financial stands ready to partner with you or your clients to grow the future-facing small businesses of tomorrow. Contact us today.