FundCanna CEO Adam Stettner talks cannabis lending, challenges, opportunities and more

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In this edition of "Rising High," The Fly conducted an exclusive interview with Adam Stettner, Chief Executive Officer and founder of FundCanna, a provider of capital for small- to medium-sized businesses throughout the cannabis sector.


FundCanna is a leading source of debt capital to the cannabis industry, offering funding products that are customizable, flexible, renewable and designed exclusively for cannabis operations and the ancillary companies that support the space. "The way FundCanna sets itself apart is that we're only lending or providing access to capital for cannabis," Stettner said. "In order to do that effectively, we have to listen to clients, pay attention to what is going on in the industry and make sure that our products are constantly evolving to keep up with their needs."

Many lenders create a credit box and then try to make their clients fit that box, he said. "What the team at FundCanna tries to do is study the industry, listen to our clients and create a customized solution that fits what each cannabis company needs to effectively run their business," the CEO said, "But that still meets appropriate credit parameters and permits us to have longevity so that we can service the industry."



In September, FundCanna entered a partnership with Distru as the company's preferred lending partner. FundCanna will be able to offer Distru's growing list of clients financing where they already operate, directly through the Distru platform with approvals in as little as 24 hours. "I've always believed and will continue to build our company on the idea that you can't be an excellent partner if you do everything alone," Stettner said. "The right way to approach servicing an industry is to find other strong companies that service the industry and collaborate."


Distru, a seed-to-sale ERP platform for cannabis operators, has "phenomenal" technology, he said, adding FundCanna always wants to be present where its clients are. "If there is a way for us to embed access to our funding solutions in Distru's platform, it creates convenience, allegiance and trust," the CEO said. "It also helps both companies build on reputation, but really for the client, it's a matter of convenience. I want to be where they need us, I don't want them to have to seek us out."


Partnering with firms that have strong integrity and solid reach creates a win-win-win situation for FundCanna, their partners and their clients, he said. "That is what we are trying to do with Distru," Stettner said. "If we can partner with market leaders in their respective fields, then we're really making their offerings stronger and enhancing their offerings because we are infusing it with access to capital. We are in the service industry and these partnerships enable us to have a broader reach and provide a higher level of service."



Additionally in September, FundCanna entered a partnership with Nabis to be the company's preferred lending partner. Nabis' partners now have a channel for financing through FundCanna, with approvals in as little as 24 hours. "Nabis is the largest distributor in California," the CEO said. "They work with over 300 brands and in one way or another over 99% of retailers in California are leveraging the Nabis platform. Their technology, service level and reputation are outstanding and we want to be there for their brands, retailers and all the sellers and buyers that are on their platform."


He added money serves as a connection for all clients that are using the Nabis platform. "If you're selling product, you need to get paid and if you're buying product, you need to pay for the product," Stettner said. "All too often in cannabis, product comes without terms and it's all cash on delivery. There is a downtime between the outlay to purchase the product and the time to create revenue. If Nabis and FundCanna can partner to give both brands and sellers access to more clients and give those buyers the ability to pay for that product over time, then everybody wins."


FundCanna will be able to offer those parties access to liquidity and extended terms, again creating convenience for clients, he said. "It opens up the ability for clients to access cash flow more freely and to buy or sell more, thereby expanding their topline number using somebody else's capital and not having liquidity restraints," the CEO said.



 A U.S. Senate committee recently voted to advance The Secure and Fair Enforcement Regulation Banking Act bill, which seeks to ensure that all businesses, including cannabis businesses, have access to deposit accounts, insurance and other financial services. The bill, which was introduced by a bipartisan group of senators, will now proceed to the Senate floor. "This is not the first time that we have seen a version of SAFE move forward through its first step," Stettner said. "Now called SAFER with some changes, I think the bill is an excellent sign of momentum for the industry and every bit of good news is compounded for a sector that has a lot of headwinds."


He noted, however, that he views the bill as more of a "political football" and posturing than anything meaningful. "There are some items that are in SAFER that are of great benefit and that would cause more banks to undoubtedly come in," the CEO said. "The more banks we have, the lower the cost and the easier it is to obtain banking, but the way the politicians frame the need for SAFE Banking is that this industry is an all-cash industry with a ton of crime and danger because we're not banked."


He said the reality is that the industry is already banked with more than 800 banks currently servicing the space without SAFER. "If you are in cannabis and you want to be banked, you are banked," Stettner said. "In that regard, we don't really need SAFER. And there isn't an instance of FinCEN or any other regulatory body penalizing or enforcing a penalty against a bank because they banked cannabis. I think this is a lot of posturing and political movement around something that won't give the industry the momentum it both deserves and needs."


He added he is frustrated by the fact that so much attention by politicians and regulators is being put into some version of SAFE Banking. "We should really be putting our attention on legalizing cannabis and normalizing it as an industry, which will then open up interstate commerce and provide normal taxation," the CEO said. "That will standardize the ability to get licensed and enable us to market regularly online and elsewhere. There is so much fragmentation in the space that to me, SAFE Banking feels like a distraction."



In August, the U.S. Department of Health and Human Services made a recommendation to the Drug Enforcement Agency that cannabis be moved from Schedule I to Schedule III under the Controlled Substances Act. "The recommendation is by far the most significant indication of policy change since the Cole Memo, which made it possible for states to legalize cannabis," Stettner said. "This is massive. It still does not go far enough, in my opinion, but it is momentous for the industry. I think it could be a huge win, but it also still needs to happen."


If the recommendation does proceed, he said he expects it would need to pass under the current administration. "I don't always understand how politics work because it doesn't follow logic," the CEO said. "We have momentum now and must capitalize on this before the potential of an administration change. If the administration were to change, we risk losing some of the momentum. My hope is that we see this move quickly through the DEA and then ultimately if that occurs, there would be some level of FDA regulation."


The passage would help resolve some of the issues surrounding 280E and taxation, he said, as cannabis will no longer be viewed as illicit. "It would have an immense impact on cost of goods and relative taxation of the same," Stettner said. "Right now, there is no ability to write off your cost of goods, I believe that would change if this passes. That would have an amazing impact on company revenue and how that revenue flows through to a cannabis company's bottom line."


He noted even with the passage, the industry will still face a lot of unknowns. "The areas that are of concern to me are interstate commerce and interaction with the individual states relative to the federal government," the CEO said. "I think we need an update to the Cole Memo or a new memo that outlines how the state and federal governments interact in that new world, but it is amazing momentum and would have a very positive impact on cannabis businesses."



Some analyst firms covering the space have noted that the focus in 2023 has been around improving operations and efficiency, but they still see cannabis as a multi-decade growth opportunity. "While there are still a lot of headwinds that remain, there is momentum building around the industry," Stettner said. "This industry is not going away so I think the outlook is bright, although the immediate or very near-term future has a lot of uncertainty."


The focus on rightsizing and optimization is due to smart operators realizing the near-term is uncertain and making sure their operations are efficient enough to power through that uncertainty, he said. "The acceptance of cannabis by the general public continues to climb and a majority of voters support legalization," the CEO said. "The question is how do we navigate the uncertain times we are in: the fact that cannabis is still federally illicit, we do not have normalized banking or capital markets, we can't operate on an interstate level and we cannot market like every other industry. If we can have an industry that is doing $25B-$30B legally, as the industry normalizes, laws evolve and regulations catch up, the industry is poised to continue to grow at more profitable levels."





When asked about the largest hurdles facing the cannabis space, Stettner pointed to the lack of certainty as well as the disparity between state and federal government operations. "It's the lack of normalization, the lack of legality, frankly," he said. "All of that in aggregate creates uncertainty and it is very hard to operate a singular business, let alone an entire industry where all those businesses are interconnected, when we're all dealing with tremendous levels of uncertainty."


The illicit federal status drives very high taxes and a ton of inconsistency on licensing, the CEO said. "In some states, there are too many retailers and not enough growers, while in others, there are way too many growers and not enough retailers," he said. "You end up with some portion of the supply chain that is always struggling, but all of that pain stems from the lack of regulatory certainty and the lack of guidance. Momentum is starting to shift into the right areas and that should start to unlock the market, create more direction, more certainty and more cash flow."





As the cannabis sector develops, Stettner said FundCanna is most excited to continue to participate in and serve the industry. "It's an amazing, creative, entrepreneurial and resilient space," he said. "To be part of the industry now, you get to see peoples' strength, resilience, passion and business acumen. This is when you are really able to see which operators are strongest and what we are seeing right now are some incredibly creative and thoughtful business operators."