A group of California cannabis operators have formed a new coalition called Financial Stability for California Cannabis (FSCC).
Between wholesalers, consumer brands and producers, the FSCC includes operators and brands representing roughly 45% of the state’s industry by sales volume. Members include Kiva Sales & Services, CannaCraft, Calyx Peak, FundCanna, Glass House Group, HERBL, Lowell, Nabis, Sunderstorm, The Parent Company and Petalfast with support from Cannabis Distribution Association.
The coalition seeks to raise awareness and offer solutions to severe credit issues that threaten the industry’s stability.
“Collections and outstanding debt related to unpaid invoices are key challenges facing cannabis operators of all types across the state, from cultivators to manufacturers, vertical brands to wholesalers, and everyone in between,” said Vince Ning, co-founder and co-CEO of Nabis. “Advocacy for solutions is largely an issue siloed to individual operators or specific sectors of the supply chain, which is why we are proud to be an instrumental part of the mission of the FSCC to demonstrate a more holistic, collective representation of the severity of the debt crisis across all levels of the supply chain, and work toward a more financially stable cannabis market.”
The FSCC coalition has begun its campaign to increase accountability of the complex problems facing California’s cannabis industry with the filing of a public letter in support for Assembly Bill 766. Dubbed the “Cannabis Credit Protection Act,” the bill is being cosponsored by the Cannabis Distribution Association, California Cannabis Industry Association and the California Cannabis Manufacturers Association, along with support from industry stakeholders, ranging from cultivators to testing labs.
“Credit law has deeply rooted foundations in other industries, notably the state’s adult beverage and construction trades,” said Brooks Jorgensen, president, Kiva Sales and Service. “The goal of credit law is to stabilize payment terms, such that distributors can provide products and services in exchange for being paid in a timely fashion, and that producers are supported with timely payment and consistent cash flow from their distribution partners.”
The bill, introduced by Assemblymember Phil Ting (D-San Francisco), seeks to establish regulatory guardrails around cannabis sales made on credit. Specifically, the bill looks to create a “credit law” with maximum terms by which licensees can sell, and ensures vendors pay their suppliers in a timely manner by giving the California Department of Cannabis Control oversight of the transactions. AB 766 will be heard in the Assembly Appropriations Committee on May 18.
“For years, restrictions at the federal level have left our state's legal cannabis operators with limited options for financing and capital,” Ting said. “This has led to a severe debt bubble across the supply chain from cultivators all the way through to the retailers. My legislation aims to bring much needed financial stability to California’s industry, while also ensuring that operators receive payment for goods and services in a timely manner.”
Industry leaders across California first began meeting informally last fall to brainstorm ways in which they could address debt challenges that have proven harmful to the California cannabis industry. An early goal of the group was finding a pathway to collecting high-level, aggregated data relating to outstanding debt across the state’s wholesale operators and brands in order to better inform regulatory conversations. Members are working with a third-party accounting firm to provide anonymized, high-level data and analysis related to credit issues across operators statewide.
“California’s industry needs a consistent flow of payment across operators, with assurance that goods and services will be paid for,” said Keith Cich, co-founder, Sunderstorm. “The goal is that advocacy provided by the FSCC and our associated research will empower lawmakers and regulators to establish workable policies around terms of sale.”
Additionally, in an effort to increase accountability and oversight of these problems, the FSCC plans to publish a detailed whitepaper in the coming weeks, outlining the scope of the dilemma and proposing potential solutions.
“Through our research project and continued analysis, we aim to produce valuable insights that can shape policies to improve the stability of our supply chain,” said Mark Ainsworth, CEO and co-founder of Lowell Farms. “We believe it is crucial that any proposed policy takes into account California's current market conditions and ensures appropriate oversight of credit sales to promote a secure supply chain.”
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