The New Wave in Cannabis Talent? One Company's Strategy to Support Enterprise MSOs

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Data from FinCEN’s quarterly marijuana banking updates, has shown that only 684 banks and credit unions are servicing the majority of the $20 billion dollar cannabis industry.

Many cannabis companies such as Etain and Sundial Growers Inc. SNDL and other single-state or regional dispensaries and growers are just starting out or fall into the small to mid-range business categories.

But are there any banking solutions with the structure and resources to support larger companies and multi-state operators (MSOs) like Curaleaf Holdings Inc. CURLF, Tilray Inc. TLRY and Cresco Labs Inc. CRLBF? There’s at least one.

Banking, Payments, and Treasury

Abaca is an example of a cannabis banking and financial platform that seeks to provide top-tier treasury and cash management solutions for well-established, elite cannabis companies.

While Abaca offers affordable banking options for small businesses, the company also prides itself on being one of a limited number of providers enabling financial operations for enterprise MSOs.

“We don’t see a lot of businesses doing what we do for larger MSOs. We at Abaca believe that the cannabis industry isn’t unbanked — it’s underbanked,” Abaca CEO Dan Roda said, “and it isn’t unserviced, it’s underserved.” 

It’s a bit of a myth that a large portion of cannabis businesses still operate mostly in cash. But for those that prefer to do so, Abaca says it has them covered.

With Abaca’s cash management services, companies are afforded 24/7 cash asset balance as well as access to industry-leading cash vaults and recyclers. Additionally, Abaca works strictly with vetted, insured and bonded logistics providers, offering door-to-door armored transportation and deposit services. This is all in an effort to reduce cash management time by up to 80% for its clients.

However, some retail studies have shown that more than 50% of consumers prefer to pay cashless.

In a recent meta-analysis conducted by Abaca, the company reported that payment with plastic tends to boost revenues by more than 8%. The study took data from nearly 15,000 transactions occurring over a 1-month period in June 2020. For its clients that have made the switch to digital, the company offers Abaca Pay. 

With Abaca Pay, clients can complete debit transactions in the store, curbside and during delivery. This reduces cash handling by up to 40%. The system sets up in a week with custom support from a dedicated representative.

Abaca’s New Treasury Center

Abaca began its business in 2017 and in August 2021 reached a milestone of completing $1 billion in compliant cannabis transactions and is closing in on the $2 billion milestone already. As the company reflects on its first 4 years of business, Roda offered some advice. 

“Cannabis businesses have unique challenges when it comes to accessing compliant, (Federal Deposit Insurance Corp.) FDIC-insured banking, accessible lending and reliable payment processing. There is no one-size-fits-all solution. As the industry matures, so will the financial solutions available to the industry.”

Roda followed up with a personal example from Abaca’s journey so far. 

“When we first started out, a major goal was solving cannabis deposit banking in the markets. Now, we are working on a comprehensive platform called Abaca Treasury Center that allows medical marijuana operators to view all accounts in one easy-to-use dashboard, manage accounts receivable more effectively, pay with automated clearing house (ACH)/electronic payments, manage multi user access, view real-time cash on hand and more.”

Abaca Treasury Center seeks to streamline cannabis banking and financial management for MSOs by seamlessly integrating with preexisting tools, consolidating financial operations for complete visibility and control and by offering FDIC-insured commercial bank accounts.

Lending Options and Terms

Abaca has seen that for many businesses, cash-flow-based loans simply aren’t enough. So Abaca says it helps its clientele leverage their assets in order to more rapidly scale their business by offering two types of loans: term and conventional. 

Term loans offered are between $50,000 and $250,000. Businesses can qualify in 24 to 48 hours, and funding availability averages two business days. Term loans are available nationwide to operators with proven cash flow for 6 months and at least 3 months of banking history.

Conventional loans between $250,000 and $5 million are also available and typically fund in 4 to 8 weeks. These loans are available to new and existing operators with hard assets (real estate, equipment, etc.) for collateral and at least 3 months of banking history. Personal guarantees are typically required.

Visit https://www.goabaca.com/ for more information.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and is not intended to be investing advice.