How Venture First Partnered
Niche Funding Opportunity
Venture First has executed two loans with Sozo Companies, a fully integrated cannabis business based in Warren, MI, totaling $8.54M. Because cannabis is a controlled substance at the federal level, companies operating in the industry have limited banking options. Further, banks that do decide to work with cannabis businesses must navigate complex legislation – making the decision to lend more difficult. Burdened by this dynamic, Sozo Companies sought out an alternative lender to provide it with the capital necessary for growth.
A Growing Industry
Michigan is the 2nd largest cannabis market in the United States. Overall, the cannabis industry continues to advance meaningfully with 40 states now having active cannabis programs and over half (24 states) of those 40 now having adult-use / recreational programs. As cannabis acceptance increases and states seek legalization for medicinal and recreational usage, the availability of institutional capital for cannabis companies has increased. Further adding to the attractiveness of lending to these businesses has been recent legislative efforts to reclassify cannabis down to a Schedule 3 drug, which would end the taxation of gross profit under Section 280E of the IRS tax codes.
Overcollateralized Debt & Strong Yield
The first loan totaling $4.0M was collateralized by a first-priority mortgage on Sozo’s production facility, which was the subject of a sale leaseback. The second loan totaling $4.5M is secured by first-priority mortgages on four retail dispensary locations at an appraised value of $6.0M (75% LTV).
