Investor Preparedness for Cannabis Operators: Best Practices for Securing Debt Financing

About the Panther Group

The Panther Group is a cannabis advisory firm, operating since 2014, with a vetted marketplace of cannabis investment deals along with an extensive network of tens of thousands of cannabis professionals and investors. Panther manages three cannabis venture funds, spanning across 25+ sub-sectors of the cannabis industry. We utilize this vast ecosystem to forge genuine connections between growth-stage cannabis companies looking for access to capital and seasoned investors.

Securing financing in the cannabis industry takes more than a great idea or a strong growth plan. You need to be prepared, have your house in order, and demonstrate to potential lenders that your business is not only viable but also well-structured and ready for the long haul. Debt financing offers a unique opportunity for cannabis operators who want to access capital without giving up equity. But to make this happen, you need to approach it strategically, transparently, and intently. If you’re aiming to secure debt financing, it’s crucial to understand what lenders are looking for and how to present your business in the best possible light. I’ve outlined some best practices for getting your cannabis business ready to attract financing, with a focus on debt to ensure you’ve covered all the bases.

Before you begin reaching out to potential lenders, it’s essential to understand what they’re looking for. Unlike equity investors, who may be willing to take on more risk for a share of your company’s future profits, debt investors are focused on your ability to repay the loan and how to protect the principal amount they lend. They’ll want to see that your business is financially stable, cash flow-positive or close to it, and capable of managing debt responsibly. The cannabis industry presents unique challenges when it comes to securing financing. Since many lenders are still hesitant to work with cannabis businesses due to federal prohibition, those who do are typically looking for businesses that can clearly demonstrate their financial health. This means providing detailed financial statements, including profit and loss (P&L) reports, balance sheets, and cash flow projections. Be ready to show how your business generates revenue and how you’ll use debt to drive growth without overextending yourself.

Your corporate governance documents are the backbone of your company’s legal and operational structure. Lenders will review these documents to understand how the company is intended to operate and function. It’s important to have these documents in order. This includes your Articles of Incorporation and any amendments, outstanding warrants, and a corporate organizational chart that outlines your company’s holdings, entities, and ownership percentages. Prepare a cap table (capitalization table) that details the company’s shareholders and their respective shares, as well as detailed ownership information for every individual or entity involved. Lenders will want to know who they’re dealing with and how decisions are made at your company.

If your business has a board of directors or a management team, provide a list of board members and key decision-makers. Having clear governance, accountability, and leadership in place helps give lenders confidence in your ability to manage the business and the debt they’re considering offering.

Financial preparedness is arguably the most important part of securing debt financing. Lenders need a clear and accurate picture of your company’s financial health, and that starts with up-to-date financial statements. This includes profit and loss statements (P&L), balance sheets, cash flow statements, trailing 12-month financials, and forecasted financial projections. These documents must reflect the complexities of the industry, from compliance costs to cash-only transactions, and be an accurate, reliable financial representation of the business. Lenders will be especially interested in your historical financials and current financial projections these documents must be accurate and aligned with every component of the business. Lenders will want a detailed plan of how you plan to use the loan to grow the business. Having a clear 3- to 5-year pro forma that shows your current and projected revenue models is key. It’s essential to disclose any financial liabilities, such as existing debt your business already holds, as well as their terms. Lenders want to see that you’re managing your existing debt responsibly and that taking on new debt won’t overburden the business. Transparency is important and helps get deals across the finish line.

One of the most common mistakes businesses make when seeking debt financing is not being clear about how they plan to use the funds. Lenders want to know exactly what you’re going to do with the money they provide. This is where your strategic plan comes into play. Prepare a concise and compelling business plan that outlines your growth strategy, key milestones, and how the loan will help you achieve them. Be sure to include a capital ask and use of funds, breaking down exactly how the money will be allocated. Lenders want to see that the loan will be put to productive use. A clear and well-thought-out plan demonstrates that you’re serious about growing the business and that you’ve considered how debt will impact your overall strategy.

The cannabis industry is one of the most heavily regulated in the world, and lenders know this. They want to see that your business is fully compliant with all local, state, and federal regulations. This means having copies of all licenses, permits, and approvals in order, as well as being prepared to disclose any legal challenges or regulatory issues your company may be facing. It’s also crucial to have a summary of any pending or threatened litigation or claims. Lenders are cautious when it comes to businesses operating in highly regulated industries, and transparency is key to building trust.

Finally, having clear and documented internal policies and procedures is another important aspect of investor preparedness. This includes your accounting policies, cash handling procedures, and decision-making processes. Lenders want to know that you’re running a tight ship and that your business has the internal controls needed to manage finances responsibly. A well structured business with defined policies is not only more efficient, but it also gives lenders confidence that their money is being managed by a team that knows what it’s doing.

To recap, here’s a quick investor preparedness checklist to help ensure your cannabis business is ready to secure debt financing:

  1. Corporate Governance: Have your Articles of Incorporation, cap table, and ownership details in order.
  2. Financials: Provide current and historical financial statements, projections, trailing 12 month financials, and a clear pro forma.
  3. Use of Funds: Present a strategic plan with a detailed capital ask and use of funds.
  4. Compliance: Ensure all licenses, permits, and legal issues are documented and disclosed.
  5. Internal Policies: Have clear and written policies for accounting, cash handling, and decision-making.
Download our full Debt Financing Checklist below to get investor-ready. This checklist breaks down essential steps and documents needed for debt financing, helping you streamline preparation and boost investor confidence.
Securing debt financing in the cannabis industry is a challenging but achievable goal if you’re prepared. Lenders want to see that your business is financially sound, compliant, and strategically focused. By getting your corporate governance, financials, and strategic plan in order, you’ll be positioned to attract the debt financing you need to grow your business. Remember, preparation isn’t just about checking boxes it’s about presenting your company as a trustworthy, capable, and financially disciplined operator. Approach the process with transparency and confidence, and you’ll be ready to secure the funding necessary to take your business to the next level.
If you are looking for alternative strategies or growth capital to support your cannabis business, don’t hesitate to reach out: info@thepanthergroup.co The Panther Group specializes in navigating the complexities of cannabis financing and can help you explore innovative solutions tailored to your needs. 

About the Panther Group

The Panther Group is a cannabis advisory firm, operating since 2014, with a vetted marketplace of cannabis investment deals along with an extensive network of tens of thousands of cannabis professionals and investors. Panther manages three cannabis venture funds, spanning across 25+ sub-sectors of the cannabis industry. We utilize this vast ecosystem to forge genuine connections between growth-stage cannabis companies looking for access to capital and seasoned investors.

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