Fintech lenders are going big in the cannabis industry
Los Angeles investors are pumping up the cannabis fintech industry, offering financing solutions to companies that have historically been denied access to conventional financing.
Bespoke Financial, a West Hollywood-based fintech lender, announced on April 13 that it had entered into a strategic partnership with Calabasas-based PayQwick, “the cannabis industry’s most comprehensive treasury and financial services platform. “.
Bespoke, the nation’s first fintech lender to provide debt financing to cannabis businesses, said in a statement that the partnership would create a compliant one-stop-shop for cannabis businesses, allowing them to access Bespoke’s lending products and PayQwick billing, electronic bill payment. , collection of armored vehicles, wire transfers and other financial services.
In a phone interview with the Business Journal, Bespoke Financial Founder and CEO George Mancheril said lack of access to traditional financial services such as deposit accounts and lines of credit ranks among the biggest obstacles. important to the cannabis industry. Thanks to marijuana’s Schedule 1 status, operators in the cannabis industry have not had access to even the most basic banking benefits.
“Bespoke focuses on lending, which has never really existed for the cannabis industry,” said Mancheril. “These companies don’t have a ton of capital, they don’t have the funding to invest, and they haven’t really been able to leverage [the industry’s] growth.”
He noted that a significant number of cannabis operators are still forced to operate entirely off-exchange, a clear handicap to their business potential even as the cannabis industry sees huge growth year after year. A Reuters report from May 2021 found that cannabis sales rose 30%, to $22 billion, in 2020, but the windfall left the industry with a literal $10 billion pile of cash thanks banking restrictions.
“They’re still north of 80% operating with physical dollars,” Mancheril said. “I’ve seen the cannabis industry grow 30 or 40 percent year over year in the United States, and it’s amazing that they’ve managed to do that despite all these restrictions.”
That amount of money changing hands creates its own compliance headaches, Mancheril said, offering federal laws that require vendors to report cash payments over $10,000 as an example. Although he is aware of the problem, Mancheril said lawmakers were in no rush to find a solution.
“Our internal thesis is that we didn’t expect any federal action until 2024, which seemed like a reasonable time frame for federal legalization,” Mancheril said. “But even if these things were to pass in 2024, it would still be a year, if not a year, before we see any real benefits for the industry.”
Mancheril said cannabis financing is a lucrative market that remains relatively untapped, and its value will only increase as cannabis moves ever closer to federal legalization.
Lack of access to traditional financial services such as deposit accounts and lines of credit was a major obstacle in the early years of the cannabis industry. The partnership will allow Bespoke customers to access preferential deposit fees and free money transfers to mutual Bespoke and PayQwick customers through the PayQwick platform.
In return, PayQwick customers receive priority access to qualify for lines of credit with Bespoke based on the underwriting and due diligence processes cannabis operators currently follow. The PayQwick platform is available for cannabis businesses operating in Arizona, California, Colorado, Florida, Illinois, Massachusetts, Michigan, Oregon, and Washington. Mancheril said that while Bespoke has expanded into San Francisco, Denver and elsewhere, the bulk of its team is in the Los Angeles area.
“Having our home base here gives us a good fundamental vantage point, as it’s the biggest cannabis market there is in the country and it will be for some time to come.”