Financing the Cannabis Industry Part 1: A Q&A with AFC Gamma CEO & Partner Len Tannenbaum

Business often require outside capital to finance operating activities and to enable scaling and growth. Financing in the cannabis industry is notoriously challenging with regulatory obstacles at the local, state and federal levels. Recent market dynamics pose additional challenges for both financiers and cannabis operators.

We sat down with Len Tannenbaum, CEO & Partner of Advanced Flower Capital Gamma (AFC Gamma, NASDAQ: AFCG) to learn more about AFC Gamma and to get his perspective on recent market trends.

Aaron Green: In a nutshell, what is your investment/lending philosophy?

Len Tannenbaum: AFC Gamma is one of the largest providers of institutional loans to cannabis companies nationwide in all aspects of production: cultivation, processing, and distribution. Cannabis companies, no matter the size, traditionally lack the lending opportunities that other enterprises have available, and that’s where AFC Gamma comes in. As an institutional lender, we provide financial solutions to the cannabis industry.

AFC Gamma is a commercial mortgage REIT that provides loans to companies secured by three pillars: cash flows, licenses, and real estate. We provide term loans, draw facilities, and construction loans.

Each loan is unique and tailored specifically to meet the needs of our borrowers. This unique partnership approach with our clients allows us to find solutions to help them expand and grow alongside them.

Since starting AFC Gamma, we have completed almost $500 million of transactions. We provide capital to an industry that others do not and, in turn, allow these operators to build cultivation facilities, production facilities, and dispensaries.

Green: What types of companies are you primarily financing?

Financing the Cannabis Industry Part 1: A Q&A with AFC Gamma CEO & Partner Len Tannenbaum
Len Tannenbaum, CEO & Partner of Advanced Flower Capital Gamma

Tannenbaum: AFC Gamma seeks to work with operators, ideally in limited license states. We make loans to companies secured by three pillars: cash flows, licenses, and real estate. We tend to lend to operators in regulatory-friendly states, such as: Ohio, Pennsylvania, New York, New Jersey, Maryland, Massachusetts, Arizona, New Mexico, Missouri, Illinois, Michigan, and Nevada. Traditionally, we shy away from states like California, Washington and Oregon given our approach to lending. We have 16 borrowers in 17 states, and what we look for are companies that we can grow with over the long term.

Green: What qualities do you look for in a cannabis industry operator or operating group?

Tannenbaum: We tend to work with three different buckets of operators. You have the large publicly traded multi-state operators (MSOs) we have lent to, such as Verano. Then you have the tier right below the top tier MSOs, where you have some public enterprises like Acreage, who is one of our borrowers, and then some private companies such as Nature’s Medicine and Justice Grown. The third tier are smaller operators. They’re single or two-state operators, and we’re typically coming in to help them build out licenses that they want or help them expand within that state. That’s why state-by-state dynamics are so important to us and why we typically only lend to limited license states.

We look at portfolio diversity on a …

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