Cannabis Investor Spotlight 0050: Vertical Company

"Cannabis Investor Spotlight" shines on Scott Jordan from the Vertical Company.  Scott explains why it is so hard for cannabis companies to get a business loan and how his company is helping to change that.

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Dan Humiston:
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Scott Jordan:
Where the process of getting the documents and then what I do is I assist them all through the process from opening conversation to actually getting the deposit into their bank account to make sure that the process goes as smoothly as possible.

Dan Humiston:
From Buminit media it's the MJBulls Podcast a show about Raising Cannabis Capital.

Dan Humiston:
I'm Dan Humiston. And on today's show the lack of traditional lenders make it nearly impossible for cannabis companies to get a loan to expand their business.

Dan Humiston:
Today we're continuing our cannabis investor Spotlight Series with Managing Director Scott Jordan from vertical company Financial Services Group.

Scott Jordan:
Hi Scott again. How are you.

Dan Humiston:
I'm good I'm good. SCOTT fills a void in this industry that just seems like it shouldn't be there but it is and that is financing companies using debt instead of equity. I know it's gotta tell you more about this because it's although it seems like it should be pretty standard. It's not in this industry is it Scott.

Scott Jordan:
It is not. It's a young industry and it's high risk because it's high risk because it's still federally illegal at this point in time although they do see the farm bill looks like it should get signed any day now. Legalize legalizing hemp and CBD production. You know THC products are still federally illegal and so the banks are not going to participate in loans and most companies that are concerned about risk of loss also do not want to participate in this. It's really the younger more aggressive companies and some family offices and also some high net worth individuals that are willing to take the chance on cannabis and also because the longest company or oldest company that's out there is probably five years old with financial result from 2000 and 13 let's say. And it's very difficult for institutional investors to get comfortable with companies that they don't have many banking options or permanent banking options. Dena. usually unaudited and see it's a difficult working with businesses that are subject to being shut down by a regulator because they haven't followed all the rules.

Dan Humiston:
Sure. I know that most industries you start off with some money from your friends or your family and then you roll right into a loan. Usually it's an SBA loan from the government and that gets you off the ground before you start going into your Series A's and Series B rounds you always have some sort of debt on your balance sheet and that's not common in this industry at all. You're right you're right.

Scott Jordan:
And that's one of the reasons why I'm so excited to talk with you today and let your audience know there is debt meaning loans for equipment real estate working capital purchase order financing for marijuana and CBD business owners.

Dan Humiston:
Yeah that's It's so nice because especially in early stage you have to give up so much equity to get funding. And if you could just get a loan to get you through some of the start up some of their will start up. But some of the growth stage I should start some of the growth stage issues if you could just get a loan by the time you reach out for venture capital you have a solid enough financials that you don't have to give up so much equity and so much ownership you're preaching to the choir.

Scott Jordan:
That's what I tell people every day when I sit down. I take a look at their financials. I come back and I say OK you know based on what I see I think you are going to be looking at a interest rate of about X and a term of about Y.

Dan Humiston:
So in other words the interest that you would charge the company has built into it all the risk that you guys are taking by making the loan. So I think people will appreciate that their interest rates are going to be a little bit higher than they would be if if it were more of a traditional loan like for getting a car loan or getting a home mortgage a mortgage mortgage from a home. This is a little bit riskier a lot riskier so you have to build that into your. The interest rate that you're charging them I don't think people would disagree with that. The money that you use to fund these loans. Where do you get that money from.

Scott Jordan:
I have developed a network starting out in 2014 when I did my very first loan. I've developed a network of lenders both small companies family offices high net worth individuals that tell me what their appetite is for lending and what areas they want to lend in. And then I take that list and when someone comes to me I take a look and look through that list and see based on their needs what funding source would be best for them and then what I do as I act as a matchmaker. I kind of translate and help a borrower who is maybe not financially savvy deal with a financing source that is financially savvy and I gather the documents and the information they need I hold their hand through the process of getting the documents and then what I do as I assist them all through the process from opening conversation to actually getting the deposit into their bank account.

Dan Humiston:
To make sure that the process goes as smoothly as possible trying to do a quick thank you to one of our former guests blaze which is a cannabis technology company with software for dispensaries distributors. And coming soon manufacturers and cultivators. This an MJbulls episode 33 recorded blaze.ME to learn how you can be part of their expansion. And now back to the show.

Scott Jordan:
Now what kind of collateral will you require in a deal like this since there's four different food groups that we landed.

Scott Jordan:
Let me explain kind of each one. So on equipment we take a UCC filing against the equipment. We also get a personal guarantee from the borrowers for working capital. We sometimes on smaller loans can do that unsecured for real estate. We obviously get a lean on the real estate and it's generally firstly and for a purchase order financing. We asked for a personal guarantee and then the product or the inventory that we're financing acts as the collateral for that.

Dan Humiston:
I see I see Well we've been speaking with Scott Jordan who's the managing director of vertical companies financial service group. So if anyone right now is in the process of growing their business in their uncomfortable giving up equity Scott Jordan provides an alternative to that and that's basically the old fashioned way you borrow money is it loan. Scott thanks for being on the MJBulls Podcast this is I know a lot of people need this and I just think more people need to know about it.

Scott Jordan:
Thank you.

Scott Jordan:
Well thank you very much for having me and I look forward to speaking with people that want to grow their business without diluting the existing equity that they have and would rather make a payment then be obligated to someone for many years and then have to sacrifice some of their equity at this time when cannabis companies are getting just these sky high valuations. Why give up equity if you can finance your growth with debt.

Dan Humiston:
I think you said it better. Couldn't have said it better myself. Scott thanks again. Just a quick reminder that you can become an MJ MJBulls member for just four dollars and ninety nine cents per month and enjoy exclusive access to companies pitch decks and the MJBulls cannabis capital directory.

Dan Humiston:
Join today at MJ MJBulls.com. Thanks for listening to the MJBulls Podcast. To learn more about today's guests or to become a guest. Visit our Web site at MJBulls.com. Today's show is produced by Buminit media with original music composed by Jamie Humiston hemp Dan Humiston and you've been listening to the MJBulls Podcast.

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