Evaluation, Scoring, and Monitoring (ESM)
Over the past few years, we have witnessed substantial and growing demand for 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 120+ touch points across business areas including, but not limited to, its:
- Operations & Processes
- Accounting & Financials
- Products & Services
- Management & Culture
- Branding & Public Relations
- Compliance & Environmental, Social and Governance
This evaluation process produces a quantitative investment risk indicator, based on CTrust’s proprietary algorithm, the Cannabis Trust Score (CTS), which is updated 17 times a year. Ultimately, the CTS is a tool for lenders and borrowers to assess risk, and structure debt on a variable rate basis, aligning both lenders and borrowers’ risk with cost of capital.
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, CTrust can provide a roadmap to operational and financial improvement as well as better access to capital.
Cannabis operators face uniquely complex challenges while managing growing, processing and/or selling a federally illegal product within or across state lines. The level of resources and undivided attention to detail required in this unprecedently new and diverse space are often overseen. A simple mistake can set a company back up to 12 months, which under current market conditions could result in a significant loss of revenue or even the potential demise of the business. Juggling the complexity of Cannabusiness, in the midst of the growing pain of the ever-changing regulatory environment, the tightening capital market, and an increasingly expensive lending space, can be overwhelming if not detrimental to Operators who are in need of capital.
CTrust reduces the chaos of federal prohibition for cannabis businesses, investors and debt holders and has already saved cannabis businesses from entering into receivership. We built this organization to bring trust back into the cannabis space.
CTrust was created to bridge that gap, bringing trust to to all stakeholders so that they may connect as free markets intended to. CTrust’s services provide quantifiable visibility into a company’s KPI’s (Key Performance Indicators) and CI’s (Critical Incidents) in order to provide measurable tools aligning Operators needs with Lenders and Investors’ expectations – creating a healthy and mature environment aligned based on trusted metrics. By a way of comparison, CTrust’s business model can be looked at as treating patients in the medical field, which consists of three main steps:
1. Evaluation (testing) – initial bill of health of the Operator’s business
2. Scoring (results) – quantitative scoring representing the evaluation of current operational and financial risk as well as the confidence level of said scoring
3. Monitoring Services (remedies) – summary of measures and required action items to address performance issues relative to best practices models specific to that Operator’s environment.
Such an objectively produced business bill of health aligns with a quantitative indicator, a risk score (Cannabis Trust Score – CTS) that will then help more effectively and equitably impact an operator cost of capital, whether equity or debt.
To begin the trust re-building process between Operators and Lenders/Investors, one must provide transparency, better communication, reliable and objective reports – CTrust provides an on-demand credit report, and an interactive dashboard for Operators, their Lenders and their Investors.
CTrust – Trust you can C.
Creditors Servicing the Cannabis Industry
Due to a number of conditions both within and outside of the cannabis industry, access to capital markets has been strained, creating a multitude of challenges for licensees and creditors alike. And while debt financing is now the predominant source of funding for the cannabis industry to expand and improve on operations, a lack of transparency and unbiased, objective analysis into these businesses has both limited and increased the cost of capital.
Investors and debt holders need quantifiable, verifiable, systematic, and trusted visibility into the cannabis businesses they support to better protect current and future investments and once again get capital flowing. CTrust services and expertise increases operational and financial transparency to reduce investment risk and allow investors and debt holders to more effectively price capital and manage market exposure.
For the first time since the industry’s birth, we are seeing signs of potential market contraction – a decrease in consumption, misalignment between supply and demand, lack of access to capital, and consequent increasing number of businesses failure. While we await potential regulatory improvements supporting continued industry maturation, the only thing that will truly have a positive and immediate market impact is more equitable and cost-effective capital flow; and the only way that will happen is via quantifiable, verifiable, systematic, and ultimately trusted visibility into cannabis businesses performance. The time for true transparency is now and today is the day we must embrace sophisticated business credit scoring allowing mature access to capital.
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 are 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.
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.
The CTrust Solution for regulators creates a framework they can trust by expanding oversight and transparency into capital while reducing the time and resources required to evaluate and monitor the activities of licensees borrowing the capital.