Evaluation, Scoring, and Monitoring (ESM)
Over the past few years, we have witnessed substantial and growing demand for objective, quantifiable, verifiable, systematic, and ultimately trusted visibility into cannabis businesses to:
- Help cannabis businesses gain better access to capital
- Allow investors and debt holders to more effectively price capital and manage market exposure
Thanks to CTrust’s proprietary formula and rigorous approach to evaluation, scoring, and monitoring of cannabis businesses, investors no longer need to extend blind trust, businesses have better access to capital, and lenders can better manage exposure and risk.
Evaluation & Scoring
Our rigorous evaluation process includes over 1,764 touch points across 42 business categories including, but not limited to, its:
- Operations & Processes
- Accounting & Financials
- Products & Services
- Management & Culture
- Branding & Public Relations
Through our evaluation process, we generate a quantitative investment risk indicator known as the Cannabis Trust Score (CTS). This score, derived from CTrust’s proprietary algorithm, is dynamic, with up to 18 updates annually (17 automatic and 1 physical audit). The CTS serves as a valuable tool for lenders and borrowers, aiding them in risk assessment and debt structuring with variable interest rates. This approach aligns the risk taken by both lenders and borrowers with the associated cost of capital. Updates to the CTS evaluation process are implemented periodically at the discretion of CTrust.
Monitoring
By leveraging CTrust’s exclusive monitoring system, “CFP + Exigence,” which enables the comprehensive and systematic performance monitoring across a cannabis company’s operations, financials, and compliance key performance indicators (KPIs), CTrust can provide a roadmap to operational and financial improvement as well as better access to capital.
Regulators - Supporting regulators in the cannabis industry
Cannabis regulators are responsible for providing transparency and compliance within the cannabis industry to ensure the health and safety of the public are a top priority. They use the powers of oversight, rule-making, and enforcement to ensure the legal cannabis industry in their state is operating by the rules. They may also partner with the industry, working with licensees and regulatory affairs professionals to identify challenges and create solutions that will improve the marketplace for businesses, investors, and consumers.
Debt financing is the predominant source of funding for the cannabis industry to expand and improve on operations. From the regulator’s perspective, there are two key challenges that exist in the debt financing model:
- Lack of transparency into the capital funding the industry, as most agencies do not have the resources or capacity to take a deep dive into the creditor’s financing the industry.
- Inability for creditors to legally collateralize licenses without the appropriate suitability investigations required by regulators, creating a higher cost of capital for licensees and potentially leading to legal challenges that can end up in receiverships and court battles.
CTrust’s solution for regulators creates a framework they can trust by expanding oversight and transparency into capital and the health of the industry in their jurisdiction, while reducing the time and resources required to evaluate and monitor the activities of licensees borrowing the capital.
Federal prohibition wreaks havoc on cannabis businesses that could thrive in other industries but get sentenced to an early death because Chapter 11 and other federal resources are unavailable. Today cannabis businesses and investors face asset liquidation and full entity dissolution via receiverships at unprecedented rates. In my 25 years in business and as a receiver, I’ve never seen anything like this.
Creditors-Supporting supply chain and B-to-B cannabis industry participants
By providing single use and subscription-based cannabis operator credit reports, CTrust helps industry credit managers set fact-based credit terms and conditions. Knowing the financial and operational health of your customers is important in every industry and especially in an industry in a rapid growth stage such as cannabis