GRAND RAPIDS, MI — Fluresh LLC, one of the largest vertically integrated cannabis operators in Michigan, announced the closing of a senior secured note with a federally regulated commercial bank headquartered in southeast Michigan.
The secured Bank Note closed on Dec. 28 and is for aggregate gross proceeds of $25 million. The Bank Note has a variable interest rate and, at the time of closing, bore an interest rate of 5.75% per annum with 50% of the aggregate proceeds capped at 7.0%.
The lender also completed a $23 million debt refinancing of Fluresh’s Grand Rapids property alongside the closing of Fluresh’s Bank Note. The Grand Rapids property is owned by a real estate development company managed by two of Fluresh’s founders.
“For Fluresh, perhaps as important as the bottom-line benefits of lower cost financing, the fact that its operations and financials passed muster with a substantial commercial bank can be regarded as an important rite of passage,” said noted attorney and cannabis industry expert Stephen Lenn, Managing Partner of Brennan, Manna & Diamond in Phoenix. “For the industry, it reflects its inexorable movement out of the shadows and into the mainstream. Possibly of greater significance is the normalization of cannabis, which likely extends far beyond banking. This substantiates the view that, whether any of the pending federal legislation is enacted, bank lending to the cannabis industry will continue to accelerate.”
Fluresh used proceeds from the Bank Note to retire its existing private placement debt, as well as to pay fees and expenses associated with the transaction. The Bank Note is a senior secured obligation of Fluresh and is payable in monthly installments until the maturity date of Dec. 28, 2024. The Bank Note is secured by Fluresh’s property in Adrian, Michigan.
Due to cannabis being classified as a schedule 1 drug, businesses in this industry have had very little access to traditional banking services. These combined loans from an FDIC insured bank are potentially the largest ever given to any marijuana related business (MRB), with one of the lowest interest rates recorded for a loan of this nature. MRBs are typically limited to only depository services through credit unions and some banks but have not had access to traditional lending.
“We are pleased to successfully complete one the largest debt financings of a cannabis operator by a federally chartered bank,” said Jacob Fein, Chief Financial Officer at Fluresh. “This non-dilutive debt financing represents an industry-leading cost of capital and simplifies our capital structure. This debt financing is a significant milestone for both Fluresh and the cannabis industry.”