Lenders are finally crossing the green line and providing loans to cannabis companies. The Cannabis Investor Series Sponsored by PodConx is back for the Fifth year. This year, the Series will again feature the cannabis industry's top investors, reviewing how the current macroeconomic cycle is affecting the cannabis industry, what to expect in 2023 and sharing investment opportunities and strategies. In today's episode, Dan Humiston is joined by Scott Jordan Founder and CEO of Alternative Finance Network. Produced by PodConx MJBulls - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Scott Jordan - https://podconx.com/guests/scott-jordan Alternative Finance Network - https://alternativefinancenetwork.com/ Recorded on Squadcast - https://squadcast.fm/
Lenders are finally crossing the green line and providing loans to cannabis companies.
The Cannabis Investor Series Sponsored by PodConx is back for the Fifth year. This year, the Series will again feature the cannabis industry's top investors, reviewing how the current macroeconomic cycle is affecting the cannabis industry, what to expect in 2023 and sharing investment opportunities and strategies. In today's episode, Dan Humiston is joined by Scott Jordan Founder and CEO of Alternative Finance Network.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Scott Jordan - https://podconx.com/guests/scott-jordan
Alternative Finance Network - https://alternativefinancenetwork.com/
Recorded on Squadcast - https://squadcast.fm/
MJ Scott Jordan
Scott Jordan and Dan Humiston:[00:00:00] Today at MJ Bulls, we are continuing this year's Cannabis Investor Spotlight series with another former guest, Scott Jordan from the Alternative Finance Network. Scott, welcome back to the show. Thanks for having me, Dan. Great to be here and great to be with you. Well, it's been a while. It's been a while.
It's long overdue. The last time you were here was December, 2018, so we have a lot of catching up to do. Back then, valuations were super high and founders were more than happy to take investors money. Now you fast forward four years and valuations have come back down to earth and I think founders are starting to realize they're not quite as anxious to give up their equity.
And this is kind of where you come in as one of the industries. I, I think I, I was looking through my notes, you. First person I think I met in the industry who was providing debt financing and you patiently waited for this whole Go Go valuation period to end. Are you seeing much more interest in debt funding [00:01:00] now today than back then?
Tremendous amount more. The, , equity markets are pretty much closed at this point in time because valuations are so low. We're actually getting calls from, , some of the MSOs and some of the larger, Companies out there, that weren't speaking to us because they could just issue additional stock and saying, Hey, we're now interested in taking a look at that sale lease back.
We're now interested in taking a look at, a PACE loan, and some of the other innovative things we're doing. So it's a very exciting time to have access capital for the. Yeah, , you were patient and now it's paying off for you.
Sometimes selling equity is the best way to grow a business and sometimes taking loans the best way to grow a business. I know you tend spend a lot of time advising your clients or people that are interested in acquiring capital. What are some things that you look at when you're considering. How best to help a funder make this decision?
Well, my feeling [00:02:00] is I followed the, uh, example back in 2015 where I helped a young growing company outta Southern California, uh, called weed maps that was looking at, giving up, equity, for a couple of million dollars at that time. And I had to arm wrestle with, the CEO there to say, Look, if you hit your numbers and you double each year, The cost of equity is gonna be enormous versus the cost of debt, and, you know, you're simply paying an interest rate and because your non plan touching Uncle Sam picks up his fair share of the equation.
And so, go ahead and, let's take what you consider to be a high cost loan at this point in time, because in the long run it's gonna be beneficial. As it turned out, when Silver Spike took them public, that 10% of the company was worth 150 million , you know, instead. So, you know, it was 150 million to the right side of the equation, right in their pocket.[00:03:00]
Debt is always better if you can, get by with that. The challenge is sometimes you're not eligible for debt because you don't have assets, you don't have cash flow or you don't have what a debt provider is, uh, is asking for. But we've now got some creative options that allow.
People that have purchase orders, that have buildings, that have other, assets to be able to use those assets or get high leverage, uh, financing on both equipment and or, uh, real estate. Cuz 2018. Seems like, man, you know, many, many, uh, you know, years ago, For sure, for sure. Well, there's always been a misconception I think, that that funding wasn't an option for cannabis businesses. But you've been providing business loans and equipment leases, leases for ever since I've known you. where are you able to. To get the capital for these loans. So, my network, the alternative [00:04:00] finance network, we have over 112 different funding choices, including banks, credit unions, life insurance companies, private money leasing companies.
Real estate, mortgage companies, , private lenders. We've got a whole SM board because, my background emanates from, uh, doing real estate financing and then also doing leasing. So I'm on many people's mailing lists. And whenever I would see, , an announcement about a loan program, I would write back, call them and saying, Will you do cannabis?
have you crossed over the green line, as I like to say? And so, one by one, I've put those, those contacts in place. And then I've met people and now, like at the latest BENGA conference where, you know, we ran into each other, there were at least eight banks that I knew of, that were at the.
Actively looking for loans before they were back in their [00:05:00] offices, you know, dreading the phone, uh, ringing because it would be someone wanting to open a bank account and they weren't ready. I mean, the industry has progressed a lot in the last five years and there are many, many more choices of debt available, including banks when you have a bankable situation.
So I think it's always better to preserve your equity because. equity is like your virginity. Once you give it up, you can't get it back. And so you don't wanna give it up if you can go ahead and get debt in order to finance it. And if you're not applying, touching company, debt is gonna be, you know, deductible as a business expense, you know, the interest is.
And so, Better to get debt and then rates have come down markedly. Most of the, funding I've got, is in the single digits for established companies that are looking to expand. and only really the construction lending and, purchase order financing, is in the [00:06:00] double digits. But, you know, again, why not take advantage and grow your company, to a larger base to ha have a higher valu.
And not give up equity at the beginning. Yeah. Especially right now where you're getting beat up on your valuations. Walk us through the process. , if a cannabis company was looking for a loan, what's, what steps do they take when they're working with your company? Sure. Well, I say, if a cannabis company is looking for funding, call me because just today, just before our call, I got off the phone with a guy that, uh, said, Hey, I've got a 5 million, need for series A and.
He didn't think that he'd be eligible for debt, but when I went through and asked the questions, we're gonna be able to get some or all of that in, uh, in a combination of debt financing, a line of credit, a second on his building. A pace loan, a whole bunch of things. Because the beauty of my model is, is, is that because we use [00:07:00] many, many different sources, and we're not wedded to one, we represent the borrower in a fiduciary capacity, I can bring together two or three different solutions to cobble together a solution for a borrower.
And so the way that it starts is it starts with a conversation you call. You go to my website, you fill out my intake form, we then get into a conversation about what it is that you have, what it is that you're looking to do, how much money do you need, and what are you trying to accomplish? And like a doctor, I'll ask the, the questions that need to be, asked and get out from you.
Okay? Here's where you're going, here's what you're trying to do. let me. Underwrite the deal. Don't try to underwrite your own deal would be a piece of advice I would give people. Sure. Don't assume that just because you heard from someone else that you need to have X, Y, Z in order to, you know, [00:08:00] get alone.
Don't think that that's always true because things are changing. You know, one of the biggest changes we've seen in the last few months is a thing called a pace loan. A PACE loan is designed, for, energy improvement in the property and , cannabis companies are eligible to apply for it and it can provide long term low rate financing for up to 25% of the value of the building for putting in.
HVAC lights, other energy saving, equipment there. And, you can do it even on a, uh, cash out refinance basis. And the one of the beauties I love about PACE is it doesn't go against the title on the building. It goes as a tax assessment. So, wow. Even if you are a high loan to value, you still can get this.
If again, you work with the right people that know and understand how to work through the system. [00:09:00] Loans like this, you've gotta have someone kind of guide you through the woods, so to speak, to be able to come out on the other side and have a happy ending as opposed to an unhappy ending where you spend a lot of time and don't end up getting, uh, that loan.
But we're super excited about it. We're working right now with, an mso. We have not been able to actually get to the finish line on a deal. And we are very confident that, this is going to result in , a long term low rate loan on a building that, he's got a high mortgage on it currently and will be able to get a loan to pay off the equipment that he.
Is currently financing or, um, some of it he owns Free and clear. So. . And I think, you know, what it does is it speaks to where experience and being in the industry for a long time, you know, I did my first loan back in 2009. helps because. , it helps to be able to know kind of, you know, where the landmines [00:10:00] are, where the roadblocks are, and to know other people in the industry and to talk about how we can both serve borrowers in a better fashion because, The whole premise of the alternative finance network is to help borrowers level up the playing field from what was a vastly unfair playing field.
Back when I started in 2009, when there were no banks that would take your deposits, let alone consider lending you money. it was very, very difficult back then. Now it's a breeze. You've got banks fighting over your deposits rates have come way down in terms of, deposit rates and, it's a great time to be in the business.
Yeah. You talked about your, your network that you brought over from your real estate days and, and convince them to cross the green line. A lot of our listeners are, Probably would consider this, this route versus, um, making an an equity investment. What would the process be for a lender [00:11:00] if they wanted to be part of your network?
Great question. they would do the same thing as a borrower. We do Go to my website, and, it's fill out a contact form, , or reach out to me on LinkedIn. , I'm be Scott Jordan in Denver.
And let's get into a conversation. Let's understand what you have, what value you bring to the table. And, uh, we can, you know, take it from there. And if we're in the same city, I live, in a suburb of Denver. I'll buy, uh, the first cup of coffee or the first beer and we can sit down and talk that way.
Sounds good. That sounds good. Well, we'll have all the links to Alternative Finance Network and Scott's information in the show notes. Or if you're comp a cannabis company that's looking for a loan or a equipment lease or. You're an investor that wants to participate in the growth of this industry, just click the links to connect with Scott or someone from Scott's team.
Scott, let's not wait four years to have you back on this show. Thanks for doing this today. Hey, I'm always happy to join you. Dan, you're an OG like [00:12:00] I am in the industry and. Heck, maybe you can ride your bike, you know, from up in Avon, you know, down to the flatland here. or I may come up there to do some, leaf peeing.
, since it's that time of year, I imagine it's getting really beautiful up, up where you live. I'd love to get up there and see you and enjoy a short ride cuz uh, I understand from Carson, you're a serious rider. , you know, 80, 90 miles, you know, in a day. And I'm a more casual rider, 45 minutes to an hour and then I want to ave or two. Well, I'm happy to do either way, but it'd be good to catch up and , we really didn't get , a chance to spend much time in Ben Z.
So let's, next time I'm in Denver, , I will make sure that , we hook up and I'll take you up on that free cup of coffee. I like that. All right. Yes.