Lead Funding - Victor Mitchell

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Victor Mitchell: [00:00:23] Our capital for it to grow their business or they're in the process of buying an existing property and we just did a deal recently for a ground up grow facility that was badly raw dirt they got entitled they got it approved and license through the city and now they're going vertical and building a custom grow house. So we do all new construction existing buildings any type of real estate back loan for the cannabis industry.

 

Dan Humiston: [00:00:50] From MJBulls Media it's the Raising Cannabis Capital show. I'm Dan Humiston.

 

Dan Humiston: [00:01:02] And on today's show how this real estate lending company is now making loans to cannabis companies to fund the purchase of their facilities.

 

Dan Humiston: [00:01:14] today the Raising Cannabis Capital investor spotlight is shining on Victor Mitchell from lead funding. Victor welcome to the show.

 

Victor Mitchell: [00:01:24] Well thanks dan. Thanks for having me.

 

Dan Humiston: [00:01:26] Well we're at the Cannabis Congress and Business Expo in New York City and state to Victor you had your first day at the show. How'd it go yesterday.

 

Victor Mitchell: [00:01:34] Oh was phenomenal. We had hundreds of people came through our booth and met a lot of very interesting and talked about a lot of interesting opportunities and hopefully we'll be able to make some important loans. Yeah.

 

Dan Humiston: [00:01:44] Well this this industry is growing so fast that we need to lead funding. Your roots are in real estate investment. I'm just reading from your Web site. You've provided private loans to date over 500 million in loans to real estate developers. I mean that's quite an accomplishment.

 

Victor Mitchell: [00:02:01] Yes we've done quite a bit we've been in business eleven years we make real estate back loans to the cannabis industry will land on just about any type of dispensary or grow house. One of the few large private lenders in the country and we have a whole team that we can generally underwrite in a matter of a few days or even a few weeks and fund most cannabis projects that meet our underwriting criteria.

 

Dan Humiston: [00:02:22] I think what's so neat about this and what you're doing is that you're bringing your skill set into this industry and your expertise and your experience in an unrelated industry real estate and now you're providing all this this expertise which is so so needed. That's really exciting to me that somebody at your level your experience level found this industry interesting. Now you're based in Colorado.

 

Victor Mitchell: [00:02:47] Zach Yes we lend in all 50 states but it's also darn worth talking about the fact that most cannabis operators especially dispensaries across the country are forced to lease they can't even have access to capital to purchase their own buildings. We have so many landlords playing games with them and jacking up the Rands and throwing them out. What have you. So it's just an inherent amount of risk in leasing in this in this industry. It's like the Wild West the cannabis industry today. So we encourage many of our operators to try to buy their buildings and we're a source of capital to provide them a real estate financing when they're ready to buy a building which is so needed.

 

Dan Humiston: [00:03:25] Like you said I know a lot of its growth facilities specifically. They've just been expanding and expanding expanding and putting a ton of capital improvements into their facilities to somebody else. Now they're saying like you know I'd love an opportunity to buy my own building but they can't get any traditional lending. Explain why that is still not an option for people to get loans for anything in the cannabis industry.

 

Victor Mitchell: [00:03:51] I mean it's quite simple the Federal Reserve still looks as cannabis as a controlled substance so it's illegal even more than 30 states have legalized marijuana in one form or another. So there is a contradiction between the federal and state laws and really the cannabis operators and owners have been locked out of any type of traditional bank financing. So we fill this niche providing real estate back loans somewhere to a bank. So we don't have any of the red tape that a bank has. I mean our rates are slightly higher than a traditional bank. We can generally lend at a higher leverage point. We can make decisions in-house and we understand and appreciate the cannabis operators I mean we have a great amount of respect for what they're doing. I think it's exciting what they're doing and I think at some point in time in the coming future we believe that it will become legal to bank and to finance probably through traditional institutions. But in the interim we're providing an important niche.

 

Dan Humiston: [00:04:44] Yeah. And I love on the new website it talked about how quickly you turn around loans. This to me just blows my mind. In my past life did a lot of loans through SBA loans and how long that process was given an idea how quickly you can turn.

 

Victor Mitchell: [00:04:59] We have a proprietary valuation tool that we use internally. But on most cannabis loans are unique properties so we do require an outside appraiser. That's the longest delay in the whole thing. Assume we get an appraisal done in a couple of weeks we can fund within a couple of weeks if we can use our own valuation tool we can fund in a matter of just a few days 80 percent of our loans to date are funded within one week. But our cannabis loans usually take two to three weeks to fund. Once we've approved the borrower we give them a term sheet so they feel comfortable they usually pay a modest deposit. We order an appraisal and we basically underwrite and site visit the properties. So it's a very fast efficient process. We're actually looking at two large transactions right now we're looking at a four million dollar loan we're looking at a six million dollar loan right now we're open to close to cannabis operators one in Michigan another one in Colorado over the next 30 days we lend in all 50 states.

 

Dan Humiston: [00:05:51] My next question if you can lend in all 50 states.

 

Victor Mitchell: [00:05:54] Absolutely we lend in all 50 states. We're looking at opportunities in the northeast here we're looking at opportunities in the Midwest. The only place we haven't funded yet a deal is in California for some reason and funding. I mean the regulatory environment is different there. We've looked at a number of options there we haven't funded anything yet in California but our primary focus is in our. Home state in Colorado as well as really putting a lot of energy to the northeast.

 

Dan Humiston: [00:06:21] I want to take a quick break to think all of our Raising Cannabis Capital listeners and to remind you that you can support the show by subscribing to MJBulls premium. It's only four dollars and ninety nine cents per month and you gain access to all previous Raising Cannabis Capital episodes as well as all other MJBulls produced podcasts and exclusive content including companies investor pitch decks go to MJBulls dot.com and enter promo code RAISING to your first month free.

 

Dan Humiston: [00:06:51] Let's talk about interest rates. I know you touched on it. What can people expect.

 

Victor Mitchell: [00:06:55] Twelve percent is our standard rate. We do up to a one two or three year loan. But unlike a traditional loan our loans don't have any amortization. So the borrowers just pay interest only on the loans. There's no prepayment penalties so it's an interest only loan with more or less a bridge loan until they can get long term you know inexpensive debt capital. When banking eventually becomes legal.

 

Dan Humiston: [00:07:17] Ok so it's not a balloon payment at the end.

 

Victor Mitchell: [00:07:19] It's a balloon payment the end of their term. They don't make principal payments during the term of the note.

 

Dan Humiston: [00:07:24] Ok. All right. If a company were interested in a real estate deal they would need the facility that they went to buy. And that's what you used to back the loan. The collateral from the real estate is how you back the loan.

 

Victor Mitchell: [00:07:35] They could be buying a facility or they could already currently own the facility and own it free and clear many operators who purchase dispensaries and grow houses. I've actually paid cash. They have no debt on their properties because I couldn't get a loan. So it's a great number of those bills so we'll do a cash out refinance so they can you have more capital for it to grow their business or they're in the process of buying an existing property and we just did a deal recently for a ground up grow facility that was basically raw dirt. They got it entitled they got it approved and licensed through the city and now they're going vertical and building a custom grow house. So we do all new construction existing buildings. Now the only type of real estate backed loan for the cannabis industry.

 

Dan Humiston: [00:08:14] Ok. In a deal like that would you need to see projections and financials or just based the entire deal on the property so we're basically an asset based lender.

 

Victor Mitchell: [00:08:22] So we really look at kind of four or five different things we obviously have to be comfortable with the property we look at the borrowers fight go score we look at their liquidity Lee we look at their net worth and we look at their experience but we're not basing on traditional cap rates we don't lend on cap rates or other traditional income based approaches because we're an asset based lender we don't have the red tape that a bank our loans are not going to be pledged or signed. Some hedge fund or some institution we carry everything inside. We handle all construction draws internally we service the notes internally and all the payoffs everything is done in our own operation.

 

Victor Mitchell: [00:08:56] I think that was one of the things they were fully vertically integrated.

 

Dan Humiston: [00:08:59] It's really important that we want to emphasize that and this message is that you're not going to turn around and sell this loan and you're paying twelve percent so it's obviously higher than a traditional bank but you get a lot more services you get a higher debt ratio you're dealing with very good customer service. I'm most proud to tell you that we've been in business eleven years we've never had a customer service complaint we have a perfect rating A plus rating from the Better Business Bureau. Perfect rating from the U.S. Chamber of Commerce 80 percent of our loans come from existing customers. So they'll pay off a loan and get a new loan with us.

 

Dan Humiston: [00:09:30] So we're very proud of our reputation we have about 500 clients currently across the six primary states that we're lending and well we've been speaking with Victor Mitchell from lead funding and we have all of his contact information on the MJBulls website. Victor thanks for being on the show today. This has been a really informative.

 

Victor Mitchell: [00:09:48] Well thanks Dan and look forward to hearing from some of your listeners.

 

Dan Humiston: [00:09:52] I'm sure you're going to be a lot of them this is a good deal.

 

Victor Mitchell: [00:09:55] I have a great day and enjoy the show.

 

Dan Humiston: [00:09:59] Thanks for listening to Raising Cannabis Capital to learn more about today's guest to become a guest. Visit our Web site at MJBulls.com.

 

Dan Humiston: [00:10:07] Today's show is produced by MJBulls Media with original music produced in part by Jamie Humiston. I'm Dan Humiston and you've been listening to the Raising Cannabis Capital podcast.

 

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Dan Humiston