The nascent cannabis industry has entered a new financial era this week thanks in no small part to a massive $250 million debt deal signed by wholesale cannabis marketplace LeafLink. According to Bloomberg, it’s one of the largest debt deals to date for any marijuana-based company, especially as the industry enters into what is being deemed a “new era of credit.”
The cannabis industry has been in a financial rut lately, ever since the salad days of 2017 and 2018 have fallen by the wayside. Back then, almost everyone was looking to invest and inject capital into cannabis as the drug has slowly become legal across the United States and Canada. But with the market drying up in recent years, and banking options remaining limited thanks to the inability of Congress to pass the SAFE Banking Act, among other things, cash has been hard to come by.
Leaflink, according to Bloomberg, is a New York-based cannabis company that operates a retail marketplace for the broader industry. In an interview with Bloomberg, Doug Gordon, who is the head of LeafLink Financial, said that “the deal is the first to introduce liquidity to the broader market.”
“To date, most of the smaller operators haven’t been privy to any debt capital,” said Gordon, according to Bloomberg. Gordon is also the executive vice president of LeafLink’s parent company. “This is the first product that has the ability to inject a large amount of liquidity to serve the industry at large.”
The deal itself is among the more creative in the cannabis industry. It’s a credit facility that was offered to the company’s finance division from a private commercial lender. LeafLink is expected to use it to expand its services.
According to Gordon’s interview with Bloomberg, LeafLink buys over $100 million in accounts receivable every year. The company does more than $2.8 billion in transactions every year, accounting for roughly 30 percent of the entire cannabis industry. The new deal will allow them to expand access to financing, according to Bloomberg.
The LeafLink deal is just one of many to raise eyebrows in the industry as of late. Cresco Labs Inc. received a loan of up to $200 million in January, and Acreage Holdings Inc. obtained another $100 million the following month.
In total, the cannabis industry raised a whopping $825 million in debt throughout the first two quarters of 2020, according to Viridian Capital Advisors.