An unnamed but major player in “institutional capital” has agreed to invest up to $60 million into a California-based cannabis lender, according to an announcement Tuesday.
San Diego-based FundCanna declined to disclose the entity that provided the $60 million senior credit facility, but described it as a “global institutional investment firm with approximately $40 billion in assets under management,” according to a company press release.
The company expects the new funding will fund its accounts-payable platform, creating a source of ready cash to “larger multi-state operators and established cannabis brands, particularly those focused on scaling wholesale distribution,” the company said.
What does FundCanna’s new facility provide to cannabis businesses?
Institutional capital has been slow to enter unsecured cannabis lending, even as operators across the regulated marijuana supply chain continue to face cash constraints, limited banking access and high borrowing costs.
In the meantime, many operators are struggling to collect on invoices.
But the environment is expected to change for both lenders and borrowers as a result of the April final rule reclassified medical cannabis as a Schedule 3 drug. More reform could follow next month.
“This is institutional capital entering a part of the market it has historically avoided,” FundCanna founder and CEO Adam Stettner said in a statement.
“That includes both established operators and the broader supply chain that drives the cannabis economy.”
The new structure could support more than $500 million in cumulative funding over the next several years, according to the company.
“What ultimately drove investor interest was FundCanna’s combination of real transaction history, risk management discipline and demonstrated capital efficiency,” Joel Magerman, managing partner at Bryant Park Capital, the investment bank that represented FundCanna in the deal, said in a statement.
“Very few companies in the cannabis finance sector have built this level of operational infrastructure and underwriting depth.”
How big is cannabis wholesale’s receivables problem?
Part of FundCanna’s strategy centers on its ReadyPaid buy-now, pay-later platform, which is designed to address accounts receivable bottlenecks in cannabis wholesale markets. Industry analysts estimate that delinquent receivables total nearly $4 billion, according to the press release.
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ReadyPaid allows vendors to receive payment upfront while giving buyers extended payment terms. The platform has processed several million dollars in transactions and is expected to play a larger role with multistate operators and established brands that want to scale wholesale distribution, the company said.
“Larger operators and brands increasingly want tools that help them expand distribution without effectively becoming the bank for their wholesale customers,” Stettner said.
