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W W W. M A I N E B I Z . B I Z 19 N OV E M B E R 2 5 , 2 0 1 9 F O C U S B A N K I N G / F I N A N C E Maine's medical marijuana market is worth $58 million this year, according to Nucleus One estimates. If you add in the black market, Santucci estimates the value of the marijuana industry in 2019 could be as high as $300 million. And his company estimates the value of the legal market for medical and recreational mari- juana could be nearly $300 million by 2025. "So ultimately, you can think of it as $300 million in cash moving from one pocket to the other," he says. For legal retailers, payment apps like CanPay are emerging, allowing direct payment from a consumer's checking account to the retailer. But such apps only cover a small portion of marijuana sales to date, says Santucci. What do businesses do with the cash? "at's the essence of the problem," says Mason. "Where is all that cash going? It's problematic for busi- ness owners. One owner I talked to was so thankful to the credit union that was providing cannabis bank- ing. He said he now feels safe at night for his wife and daughter. Before, he was either leaving that cash at his business or taking it home. "Business owners are walking around literally with duffel bags and suitcases full of money. ey're paying employees and vendors in cash. It's opening wide the opportunity for crime. at's a problem for the state, too. If all the transactions are happening in cash, the state can't properly track the amount of business that's happening, from the regulatory, safety and security perspectives and from the tax perspective either. ose dollars need to go into the traditional financial services industry." C O N T I N U E D O N F O L L OW I N G PA G E » Beyond banking Here are finance strategies employed by two cannabis companies. Canuvo In 2010, Canuvo founders Glenn and Sage Peterson invested personal funds to buy an insulated tractor- trailer and outfitted it for medical marijuana cultivation. Crop revenue allowed them to buy additional trailers. In 2015, unable to obtain a traditional bank loan, they bought a 120,000-square-foot former mill in Bridgton using owner financing. Unable to obtain traditional equipment loans, they searched for leasing companies with in-house lending. "For the most part you're looking at third-par ty equip- ment lenders and paying 8% to 16% on that money," says Josh Quint, Canuvo's director of operations. "That's what we did on our HVAC equipment. It's way more complicated and inefficient than it needs to be." Today, Canuvo comprises a sophisticated cultiva- tion facility in Bridgton with features like a custom- designed integrated climate system, and a commer- cial kitchen and retail shop in Biddeford. It produces 1,000 pounds of cannabis a year and makes value- added products like tinctures and edibles. "Cash flow is key in this industry," Quint says. Atlantic Cannabis Collective Atlantic Cannabis Collective expects to have the first two of three buildings completed within the coming weeks for cultivation of adult use canna- bis for the wholesale market. Build-out includes energy-efficient systems like LED and natural light- ing, radiant heat, underground irrigation and automated con- trols with remote monitoring. All financing has come from friends and family, says CEO Cliff Miller. A long-time real estate inves- tor in Maine and Florida, Miller says financing and build-out are no different from other projects. "We built apartment build- ings and subdivisions," he says. "The money was there in our own group. It was just deciding where that money best served us. We decided to build greenhouses instead of other types of development." Miller expects to go live in January, with the first harvest in March. Target production is 6,000 to 7,000 pounds per year, at initial prices from $1,800 to $3,200 per pound. Prices are expected to fall as competition increases, but he expects operations to remain sus- tainable due to energy and operational efficiencies. You're looking at third-party equipment lenders and paying 8% to 16% on that money. — Josh Quint Canuvo

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