Tag Archives: credit

A Q&A with George Mancheril, Founder & CEO of Bespoke Financial

By Cannabis Industry Journal Staff
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Bespoke Financial was the first licensed FinTech lender focused on the legal cannabis industry. Founded in June of 2018, Bespoke offers four types of lending products: Invoice financing, inventory financing, purchase money financing and a general line of credit. With just over two years of originating loans to clients, they have benefitted from being a first mover in the cannabis lending space.

George Mancheril is the founder and CEO of Bespoke Financial. He has over fourteen years of experience in finance, with a special focus on asset-based lending, off balance sheet financing of commercial assets and structured credit. Following a stint with Goldman Sachs, he worked at Guggenheim Partners Investment Management’s Structured Credit Group in Los Angeles where he worked on structuring esoteric asset financing for a variety of commercial assets including airplanes, container leases and receivables.

Since 2018, Mancheril and his team at Bespoke Financial have deployed over $120 million in principal advances without any defaults and across eleven states. We sat down with Mancheril and asked him about the history of his business, how it’s been received so far and how the past few years of financial activity in the cannabis sector might shape the future.

Cannabis Industry Journal: What is Bespoke Financial in a nutshell?

George Mancheril: Bespoke Financial is the first licensed FinTech lender focused on the legal cannabis industry. Bespoke offers legal cannabis businesses revolving lines of credit that address the top problem in the industry – lack of access to non-dilutive, scalable financing to capitalize on growth opportunities and improve profitability. Due to the federal illegality of cannabis, traditional banking institutions cannot work with our clients even though these operators are working within the legal regulatory framework of their state. Bespoke solves this problem for businesses across the cannabis supply chain along with ancillary companies affected by the lack of access to traditional capital markets.

CIJ: How does your company help cannabis businesses?

George Mancheril, Founder & CEO of Bespoke Financial

Mancheril: Bespoke Financial offers 4 lending products – all are structured as a revolving line of credit but each allows our clients to access capital in a unique way based on their specific needs. Our Invoice Financing product, allows businesses to borrow capital against their Accounts Receivables in order to manage general business expenses, particularly if the borrower’s business growth is slowed due to a long cashflow conversion cycle. Inventory Financing and Purchase Money Financing allow our clients to finance payments to their vendors, which helps our clients achieve economies of scale by increasing their purchasing power. Lastly our general Line of Credit allows for the most flexibility for our clients to utilize our financing by either financing payments made directly to vendors or drawing funds into the client’s bank account to manage business expenses.

CIJ: I know the company is only a few years old, but can you tell me about your company’s success so far?

Mancheril: [Clarification, Bespoke was founded in June 2018 so we’ve been around for 3 years but we now have over 2 years of originating loans to clients.] Bespoke Financial has benefitted by being a first mover in the cannabis lending space as the first licensed lender specifically addressing the financing needs of cannabis operators, starting in early 2019. Over the past 2 years we have developed and refined our proprietary underwriting model to identify over 50 active clients spanning the entire cannabis supply chain. Since inception, Bespoke has deployed over $120 million in principal advances without any defaults to date and expanded our geographic footprint across 11 states. Our growth and success highlights our company’s expertise in structuring financing solutions which address the unique capital needs of cannabis companies.

CIJ: Can you discuss how the recent M&A activity, current and recent market trends, as well as the pandemic has affected your company’s growth?

Mancheril: The cannabis industry overcame a variety of challenges presented by the COVID-19 pandemic, ending the year with record sales in both new and existing markets. The support from state and local governments, evidenced by the industry’s essential business designation and the easing of regulations, coupled with increasing consumer adoption of cannabis combined to increase the industry’s demand for capital throughout the pandemic. Bespoke was well positioned to partner with cannabis companies across the supply chain and was proud to help our clients thrive during this pivotal period.

Jeeter was able to grow sales over 1,000% within the first year of working with Bespoke

Coming into 2021, the cannabis industry and investors shared a very positive outlook for the future based on the previous year’s experience and expectations of material easing of federal regulation. While M&A activity in the industry has increased over the past 6 months, the overall consensus has been that both the frequency of exit opportunities and the corresponding valuations will continue to increase as federal decriminalization opens new sources of capital and materially changes investors’ valuation assumptions. In general, we’ve seen cannabis companies focused on both capitalizing on the increasing opportunity presented by the industry’s organic growth and maximizing the benefits of future regulation changes by utilizing the resources and capital currently available to increase revenue, expand into new markets, and work towards profitability. All of these factors have further compounded the industry’s demand for financing and we expect to see continued growth in our lending activity in line with the industry’s growth.

CIJ: Who has been your most successful client?

Mancheril: We have a handful of cases studies and client success stories here on our website. One of the most exciting growth stories we have seen has been our client DreamFields whose in-house brand, Jeeter, is now the #1 pre-roll brand in the state of California. Prior to working with Bespoke, the brand was not ranked in the top 25 but was able to grow sales over 1,000% within the first year of working with us and achieve the #1 spot in their product category.

SAFE Banking Act Included in COVID-19 Legislation

By Aaron G. Biros
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UPDATE: Late in the evening on May 15, the House of Representatives passed the HEROES package, voting 208-199 (with 23 abstentions). The bill now now heads to the Senate where its fate is more uncertain. 


Earlier today, Speaker Nancy Pelosi debuted the latest piece of legislation to help Americans impacted by the coronavirus pandemic. The Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) is a large bill containing emergency supplemental appropriations more than 1,800 pages long.

On page 1,066, those in the cannabis industry will find a very exciting addition: the Secure and Fair Enforcement (SAFE) Banking Act. For the uninitiated, the SAFE Banking Act would ensure access to financial services for cannabis-related businesses and service providers.

Currently, federally regulated financial institutions face penalties for dealing with cannabis companies due to the Controlled Substances Act. The bill, if passed, would eliminate the possibility of any repercussions for doing business with cannabis companies.

The impact of this bill becoming law would be widespread and immediate for both the cannabis market and banks looking to invest in the cannabis industry. With banks given the green light to conduct business with the cannabis industry, there is no doubt that many financial institutions will rush to the opportunity. Cannabis businesses will benefit greatly, no longer having to deal with massive quantities of cash and gain access to things like loans, bank accounts and credit lines. Furthermore, cannabis companies will benefit from the rush of banks getting in the game, leading to a competitive and affordable banking market.

It is no secret that cannabis businesses have had a cash problem for decades now. Given the coronavirus pandemic, CDC guidelines dictate minimizing the handling of cash and encourage payment options like credit cards. Cannabis businesses dealing with large quantities of cash puts them, their employees, their customers and even regulators at risk.

Aaron Smith, executive director of NCIA

According to Aaron Smith, executive director of the National Cannabis Industry Association (NCIA), the cash problem is a serious, unnecessary health risk. “On behalf of the legal cannabis industry, we commend the congressional leadership for prioritizing public health and safety by including sensible cannabis banking policy in this legislation,” says Smith. “Our industry employs hundreds of thousands of Americans and has been deemed ‘essential’ in most states. It’s critically important that essential cannabis workers are not exposed to unnecessary health risks due to outdated federal banking regulations.”

In fact, it was the NCIA and a handful of other industry organizations that lobbied Congress last week to include language from the SAFE Banking Act in the HEROES Act, citing the known fact that cash can harbor coronavirus and other pathogens, along with the “personal proximity required by cash transactions as reasons for urgency in addition to the other safety and transparency concerns addressed by the legislation.”

The SAFE Banking Act was already approved by the House of Representatives. In September of 2019, the bill made a lot of progress through Congress, but stalled once it made it to the Senate Banking Committee.

The HEROES Act will be debated by the House of Representatives prior to a floor vote. If it passes the House, it moves to the Senate, which is about as far as it made it the last go around. However, because the banking reform is included in coronavirus relief legislation, there is a newborn sense of hope that the bill could be signed into law.

CARES Act – Stimulus Package Won’t Aid the Cannabis Industry

By Steve Levine, Megan Herr
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On Wednesday, March 25, the United States Senate approved an estimated $2-trillion stimulus package in response to the economic impact of the COVID-19 outbreak. The legislation, formally known as the “Coronavirus Aid, Relief, and Economic Security Act” (or the CARES Act), was approved by the Senate 96-0 following days of negotiations. One of the most highly anticipated provisions of the CARES Act, the “recovery rebates” for individuals, will provide a one-time cash payment up to $1,200 per qualifying individual ($2,400 in the case of eligible individuals filing a joint return) plus an additional $500 for qualifying children (§6428.2020(a)). The CARES Act, which remains subject to House approval, also prescribes an additional $500 billon in corporate aid, $100 billion to health-care providers, $150 billion to state and local governments and $349 billion in small business loans in an effort to provide continued employment and stabilize the economy. The legislation further provides billions of dollars in debt relief on existing loans.

CARES Act – Paycheck Protection Program 

Under the CARES Act, small businesses who participate in the “Paycheck Protection Program” can receive loans to cover payroll expenses, group health care benefits, employee salaries, interest on mortgage obligations, rent, and utilities (§1102(F)(i)). To qualify for these small business loans, businesses must employ 500 employees or less, including all full-time and part-time employees (§1102(D)). Eligible recipients must also submit the following as part of their loan application: (i) documentation verifying the number of full-time equivalent employees on payroll and applicable pay rates; (ii) documentation verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments; and (iii) a certification that the documentation presented is true and the amounts requested will be used to retain employees and make necessary payments (§1106(e)). The CARES Act delegates authority to depository institutions, insured credit unions, institutions of the Farm Credit System and other lenders to provide loans under this program (§1109(b)). The Treasury Department will be tasked with establishing all interest rates, loan maturity dates, and all other necessary terms and conditions. Prior to issuing these loans, lenders will consider whether the business (i) was in operation as of February 15, 2020, (ii) had employees for whom the business paid salaries and payroll, or (iii) aid independent contractors as reported on a Form 1099-MISC (§1102(F)(ii)(II)).

What Does This Mean for Cannabis Businesses?

Due to the continued Schedule I status of cannabis (excluding hemp) under the Controlled Substances Act (CSA), cannabis businesses are not eligible to participate in the Paycheck Protection Program intended to keep “small businesses” afloat during the current economic crisis. Because federal law still prohibits banks from supporting marijuana businesses, financial institutions remain hesitant to service the industry, as anti-money laundering concerns and Bank Secrecy Act requirements (31 U.S.C. 5311 et seq.) are ever-present. As a result, even if cannabis businesses technically qualify to receive federal assistance under the Paycheck Protection Program, they will face an uphill battle in actually obtaining such loans.

Cannabis Businesses Are Also Precluded from “Disaster” Assistance

Moreover, the conflict between state and federal law continues to prevent cannabis business from receiving assistance from the U.S. Small Business Administration (SBA) under the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6201). In light of the COVID-19 outbreak, the SBA revised its “Disaster Loan” process to provide low-interest “Disaster Loans” to eligible small businesses. To qualify for these loans, a state must submit documented business losses for at least five businesses per county. The problem, however, is that the SBA still refuses to assist state-legal cannabis businesses in equal need of small business loans. Specifically, in a 2018 Policy Notice, the SBA reaffirmed that cannabis businesses – and even some non “plant-touching” firms who service the cannabis industry – cannot receive aid in the form of federally backed loans, as “financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity.” The 2018 Policy Notice clarified that the following business are ineligible to receive SBA loans:

(a) “Direct Marijuana Business” — a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to personal use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

 (b) “Indirect Marijuana Business” — a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to support the use, growth, enhancement or other development of marijuana. Examples include businesses that provide testing services, or sell grow lights or hydroponic equipment, to one or more Direct Marijuana Businesses. In addition, businesses that sell smoking devices, pipes, bongs, inhalants, or other products that may be used in connection with marijuana are ineligible if the products are primarily intended or designed for such use or if the business markets the products for such use.

More recently, the SBA provided further clarification that cannabis businesses are not entitled to receive a cut of the federal dollars being appropriated for disaster relief because of the CSA’s continued prohibition of the sale and distribution of cannabis. Last week, the SBA reiterated that:

“With the exception of businesses that produce or sell hemp and hemp-derived products [federally legalized under the 2018 Farm Bill], marijuana related businesses are not eligible for SBA-funded services.” (@SBAPacificNW)

Consequently, because of the continued Schedule I status of cannabis under federal law, cannabis businesses will not be entitled to receive Disaster Loans from the SBA, regardless of whether they qualify as a struggling small business.

Resolving the Issue

While the federal government has been considering legislation, such as SAFE Banking and the STATES Act, to create a more rational federal cannabis policy, neither of these bills are likely to pass any time soon given the current COVID-19 pandemic.

At the end of the day, until Congress passes some form of federal cannabis legalization, these small businesses will remain plagued by the inability to receive financial assistance, as evinced by the Paycheck Protection Program.

2020 Financial Trends for the Cannabis Industry

By Melissa Diaz
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The past year has been another strong year in cannabis. Investors continued to pour money into the burgeoning industry — surpassing 2018 investment totals in just 40 weeks — and new markets opened up for recreational and medical cannabis. And following the passage of the 2018 Farm Bill, CBD has proliferated and become one of the hottest health supplements in the country.

But as the year winds down, the industry appears to be poised for a more challenging shift in the new year, as once-heady expectations for some big companies don’t pan out and some states clamp down, rather than loosen up, certain regulatory hurdles.

Here are some financial trends to keep an eye on in cannabis over the next year:

Finding New Capital Investment Will Be Tougher

After an initial investment boom in recent years, cannabis investors are realizing not everything colored green turns to gold. With public cannabis companies not performing as well as hoped and restrictive tax laws still plaguing the industry, investors are growing more cautious when it comes to cannabis. Add in other macroeconomic trends that are pointing to a global economic slowdown, and 2020 is shaping up to be a tough year to find cannabis capital.

Image: Flickr

That’s not to say funding will completely dry up, but operators and business owners must be aware that investment deals that perhaps closed in a matter of days in previous years, likely will take weeks or months while investors dig deeper into books and perform higher levels of due diligence before inking a deal. This means cannabis businesses must carefully plan and watch their cashflow and pursue fresh capital or investment earlier rather than later.

Expect More M&A and Consolidation

With the green rush reaching a crest of sorts, reality is setting in for some smaller cannabis operators. Expect to see more consolidation with smaller dispensaries and cultivators being bought up and absorbed by the big kids. More limited capital and investment options coupled with continued regulatory and legal uncertainties mean unsustainable operating costs for independent and smaller operators, which means the only way to survive may be to sell to a larger player.

New Markets & Regulations

The new year brings new states opening up to recreational or medical cannabis sales, as well as newer or altered regulations in existing markets. Cannabis firms must keep an eye on these new markets and regulations to best determine whether they plan to expand or not.

How stringent or lenient regulations are written and executed will determine the size and viability of the market. One state may severely limit the number of licenses it issues, while others may not put any limit. For example, Oklahoma issues unlimited licenses to grow hemp at $1,500 a piece. While that sounds promising for smaller hemp producers, it also could potentially lead to an oversaturation in the market. On the flip side, a more restrictive (and costly) licensure structure could lead to a far more limited market where only the industry’s largest players will be able to compete.

Image: Cafecredit, Flickr

Cannabis businesses also should keep an eye out for new regulatory hurdles in existing cannabis markets. For instance, California is raising its excise tax on cannabis beginning Jan. 1. That will result in higher costs for both consumers and cannabis companies. High state and local taxes have been a challenge industrywide because they make legal operators less competitive with the illicit market. Also, a proposed rule in Missouri could ban medical cannabis operators from paying taxes in cash. Such a rule would prove problematic for an industry that has had to rely on cash because of federal banking regulations. 

Credit Card Payments

While cannabis businesses may face several new and recurring hurdles in 2020 on the financial front, at least one looming change should make business easier: credit card payment processing. Because of cannabis’ continued banking woes, dispensaries and other plant-touching operations have not been able to accept credit cards. Though federal banking limitations remain in place, in 2020 we will see payment processors introduce new, creative and less expensive ways to navigate current banking limitations that will allow cannabis sellers to take credit cards. Opening up payments in this way will not only make transactions and record keeping easier for customers and businesses alike, it also will attract consumers who don’t use cash.

While some of these trends may prove challenging, in many ways they are signs that the cannabis industry is shifting and maturing as we enter a new decade. Many hurdles remain, but the size and momentum of the industry will only continue to grow in 2020 and beyond.