Capital expenditures are funds used to cover the cost of assets like equipment, technology, or property to enhance or expand an organization. As many entrepreneurs lack the liquidated cash to purchase these things outright, they look for lenders for funding. Eligible applicants receive funds to cover capital expenditures, ultimately investing in assets that garner a generous return. Though there are several CapEX lenders to consider, few cater to the cannabis industry.
Limited Resources for the Cannabis Industry
Although many states across the US have legalized cannabis on a medicinal or recreational level, cultivators and manufacturers face challenges. As the federal government still categorizes cannabis as a schedule 1 controlled substance, acquiring the funds for everything from real estate to equipment is an uphill battle. Fortunately, private institutions like XS Financial have stepped up to provide end-to-end relief for this booming industry.
XS Financial Offers A Solution
XS Financial is one of the nation’s largest vertically integrated CapEX cannabis companies in the world. Established in 2017 the company offers an alternative funding source for the cannabis industry across the country. They provide CapEx financing and equipment leasing solutions to cannabis companies in the United States, including cultivators, processors, manufacturers, and testing laboratories. Their dynamic services have assisted cannabis companies in easing the economic strain, improving workflow, enhancing productivity, and expanding as the industry matures. We talked to Antony Radbod, Chief Operating Officer of XS Financial to learn more.
1. What was the inspiration for starting XS Financial?
Long before XSF formally entered the space as a business, we had already identified a huge gap in the landscape. There was a large need for secured debt financing, which is uniquely challenging within the cannabis space. While numerous investors were targeting loans secured by property, we decided to focus on CAPEX financing. The industry looked very different back in 2017, and investors were providing equity to companies without really understanding the unique challenges many of them would face. Since so much of the capital need is focused on equipment and infrastructure, we leaned in and decided to ‘skate where the puck was going,’ and since 2017, XSF has been recognized as a leader in the industry.
2. Were you apprehensive about getting involved with the cannabis industry?
Not at all. We studied specific markets and businesses before committing and lined up investor capital in support of the opportunity. We felt that the regulatory uncertainty, challenges surrounding access to capital, and being early to a new industry could support outsized returns.
3. Was it/is it challenging to find investors for this venture?
Given the legal complexity of our industry, you lose a large number of active investors. However, that is the problem that XS Financial solves, and because we are not a plant-touching business and produce regular recurring payments, we have been able to source a broad range of both equity and debt investors.
4. As more states loosen the grip on marijuana laws, has there been an influx in applications or interested investors?
Absolutely. It is a dynamic industry, and every day, it becomes more mainstream.
5. Although capital expenditures financing is a traditional concept in business, catering to the marijuana industry is relatively new. Do you find that there is a lot of competition? If so, what makes XS Financial different?
There are many opportunistic investors that structure transactions in a way that isn’t always best for the operators. We are building a platform that is financing the largest businesses in our industry and taking a long-term approach. We work with companies that are purchasing equipment in multiple states at any given point and provide leases
that allow our customers to participate in state and other financial tax incentives. Additionally, we have partnered with over 150 original equipment manufacturers and distributors serving the industry. Finally, since we exclusively do cannabis operators, we understand the complex structuring, capital raising, and compliance burdens our customers face, which helps streamline underwriting and fast approval.
6. For a company interested in working with XS Financial, how does the process work?
XSF has a streamlined application and underwriting process. We request similar documentation from all companies and take time to understand each specific business uniquely. We can close transactions in a few short weeks, and once an initial master lease is signed, a client can continue to draw on a pre-approved lease facility as often as needed with only a few days notice.
7. What type of equipment do you help your clients/partners acquire?
XSF is uniquely positioned to be an end-to-end partner. This means we can partner to expertly procure everything they could need, which can include but is not limited to: cultivation, automation, processing, pre-and post-processing, vehicles, food processing, testing, and much more.
8. What are the requirements for getting approved for a leasing opportunity?
We look for companies past the start-up phase and have a proven track record of executing their business plan.
9. What states does XS Financial currently service?
XSF is currently active across 15 states and will provide leasing solutions to businesses operating in any state in the U.S.
10. XS Financial also offers procurement services. What does that entail?
XSF partners with over 150 original equipment manufacturers and works hand in hand with our customers’ procurement teams to ensure all equipment is ordered correctly. We track and monitor all purchases to ensure all documentation is in order, shipping and installation dates are met, and act as a partner for our customers.