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With cannabis banking suffering a setback in recent days in Congress, private debt provider Bespoke Financial has raised its largest credit facility at $125 million with plans to deploy the capital within a year.
Bespoke Financial drew capital for the credit facility from an institutional investment fund with more than $2 billion in assets under management, said Bespoke Financial CEO George Mancheril. Citing confidentiality agreements, the firm declined to name the investor.
“Our core belief is that cannabis will operate like any other consumer segment,” Mancheril said. “They’re all dependent on debt to operate and grow. The idea is that this will be a reality and we can be a first mover on the debt side.”
The credit facility comes after Bespoke Financial raised $8 million in venture capital funding in April in a round led by Snoop Dogg’s cannabis investing firm Casa Verde and Sweat Equity Ventures.
Last week, Congress dropped the SAFE Banking measure that would have opened up capital raising for cannabis companies from the annual defense spending bill.
See Also: Hope for SAFE Banking measure shifts to 2022
While setbacks on the federal level have slowed the flow of capital to the sector, some institutional pools of capital are suddenly warming up to cannabis lending, Mancheril said.
Cannabis companies have been able to raise equity by selling stock, often on the Canadian Securities Exchange. And in 2017 and 2018 the vast majority of their capital came from equity investors. However, issuing debt eliminates the uncertainty of raising equity capital in bearish stock market conditions, Mancheril said.
“It’s very challenging to start an industry from the ground floor,” Mancheril said. “Valuations will get a haircut if you tie funding to equity — if you’re trying to raise money in a down market,” said. “Debt financing is a more manageable source of capital and we felt we could be a leader if we find good borrowers.”
Bespoke Financial lends to businesses with $10 million to $150 million in revenue to provide capital for growth to a variety of cannabis businesses, with loan sizes ranging up to $15 million. The firm secures loans against corporate assets, excluding real estate. In some states, cannabis inventory is allowed to be used as collateral.
Founded in 2018, Bespoke Financial started lending from a $10 million credit facility in in 2019. It grew its debt pool to $50 million 2020 and now to $125 million. At last check, Bespoke Financial is working in 12 regulated markets and it’s advanced more than $200 million of capital to borrowers.
Along with Casa Verde Capital and Sweat Equity Ventures, Bespoke Financial raised its $8 million Series A financing round with participation from Ceres Group Holdings, Greenhouse Capital Partners, DoubleLine Capital co-founder Philip Barach and venture capitalist Robert Stavis. All told, Bespoke had raised $28 million in funding as of April.
Prior to his move to Bespoke Financial in 2018, Mancheril worked as a vice president at private equity firm Guggenheim Partners.
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