What is the market opportunity?
The cannabis industry is projected to grow to $16 billion by 2020. Even as new states legalize cannabis each year, banks remain reluctant to provide the industry with financial services. The result is that 80% of cannabis businesses that touch the plant are unbanked and lack access to a range of important services including small business loans.
Every business requires financing to grow, whether that financing is through reinvested profits, equity investments or business loans. Because banks are on the sidelines, it creates an opportunity for Good Tree Capital to supply loans to cannabis companies and deliver well above average returns to our investors.
We believe that there is $1 billion in unmet demand for small business lending.
What’s the demand for Good Tree Capital loans?
Good Tree Capital has more qualified loan applicants than we are currently able to service. We receive traffic from all 50 states and 9 foreign countries. We generate up to $10 million in monthly loan applications nationwide. Roughly 25% of those applicants are qualified borrowers who are willing to pay a premium for access to business loans.
Unmet demand = value left on the table
Why is Good Tree Capital better than competing investment options?
Easy: You get more bang for your buck. Good Tree Capital investors earn 28.7% ROI on every dollar invested. Our investors’ returns are stronger because we earn more revenue and have lower costs per loan than our competitors.
We lend to established cannabis companies that would typically pay 7-8% APR for a small business loan. Good Tree Capital’s average APR is 15.32%.
Not only do we earn more, we also have lower costs. The largest cost drivers in small business lending are evaluating applicants’ credit and complying with regulations. We automate those functions, allowing Good Tree Capital to make loans faster, more accurately and at a lower cost than most banks. Our algorithm evaluates loans in seconds and accurately predicts credit risk in 98.2% of cases.
We’re confident in our value proposition.
How does Good Tree Capital make money?
Good Tree Capital’s Managers receive a one-time upfront fee of 2.5% of your investment and 20% of the returns, only after investors have recouped their initial investment.
The remaining 80% of returns will be allocated to investors.
How does investing with Good Tree Capital work?
Good Tree Capital is an online platform that offers an entry-point for everyday investors to diversify their investment profile with an investment in the cannabis industry and also allows cannabis businesses to apply for loans.
Investors commit to a sum and Good Tree Capital applies a 2.5% fee to cover our operating expenses.
The remaining 97.5% of investors' funds are used to make loans.
We identify low-risk applicants using a specially-developed algorithm that considers detailed financial performance, longevity and available collateral.
Approved borrowers make monthly repayments, which are distributed back to investors quarterly.
That’s it. There are no hidden fees or hard to understand terms.
How much should I expect my investment to grow?
The fund is projected to generate a 28.7% net return on investment over the 3-year life of the fund. For every $1,000 invested, we project investors will receive up to $1,287 in returns over the lifetime of the fund.
For the more seasoned investor, this equates to an annualized net internal return rate (IRR) of 13.3%.
Investors will receive quarterly distributions beginning 1 year after their initial investment, and on the last day of each quarter for the next 2 years. There will be a total of 8 quarterly distributions.
While we are confident in our projections, the SEC does not permit us to guarantee returns.
What is the minimum to invest?
We set our minimum at $1,000.00 because it’s important that any qualified investor be able to get involved with and benefit from the growth of the cannabis industry. Our goal is to be an accessible investment opportunity.
At the same time, we do not limit what you may invest. Good Tree Capital’s average investment amount is $38,000 and the largest single investment (so far!) is $200,000. How much you invest is completely up-to-you, whether it’s $1,000 or $1,000,000.
Is my investment secure? How do you handle delinquencies and defaults?
All loans are personally guaranteed by the owner(s) and secured with assets valued at greater than 120% of the value of the loan. We only accept tangible, durable assets such as real estate, equipment and/or operating licenses as collateral.
Good Tree Capital is also contractually senior to all other debt and equity holders, in the event of default. We will liquidate assets to ensure the value of the loan is recovered.
In other words, your investment couldn’t be safer.
How do I exit my investment, or withdraw funds?
Investors may withdraw their funds - without penalty - up to 30 days after their initial investment.
After the 30-day grace period, investors who choose to withdraw their investment before the fund closes will incur a 1.5% administrative fee to cover the cost of reversing the investment. If not withdrawn, all funds are held for 3 years.
What am I signing up for as an investor?
Each investor agrees to Good Tree Capital’s Subscription and Operating Agreements.
The Subscription Agreement outlines your investment amount as well as your rights as an investor.
The Operating Agreement outlines our organizational structure and rules of governance.
Am I investing in the loan of a single borrower?
No. You are investing in a pool of funding that is loaned out to licensed cannabis businesses nationwide.
What is an accredited investor?
In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one's primary residence, or an income of at least $200,000 each year for the previous two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.
You may also invest as an entity (LLC, Partnership, C-corp, etc.) if your entity meets certain requirements. The SEC provides specific guidance here.
How is my money taxed and insured?
Good Tree Capital is a Limited Liability Company subject to “pass-through” tax treatment wherein profits/losses pass through the entity to the individual investor, who will be responsible for paying the necessary taxes. All investors will receive a K1-statement in January of each tax year.
All funds are held at Salal Credit Union in Seattle, Washington. Salal Credit Union is an FDIC-insured bank.
Is there a legal risk in investing in the cannabis industry?
Good Tree Capital does not touch the plant, which means we are not subject to the same enforcement risks as those who touch the plant.
Additionally, existing law protects licensed medicinal cannabis companies from federal prosecution. The Rohrabacher-Farr Amendment prohibits the Justice Department from interfering with states’ implementation of their medicinal cannabis laws. We lend to medicinal cannabis operators.
Recreational-use cannabis companies are technically open to federal prosecution; however, the Justice Department has met strong resistance when attempting to crack down on states that have legalized recreational-use cannabis.
We estimate the legal risk to investing in the cannabis industry, and specifically in Good Tree Capital, to be negligible.
How do businesses currently benefit from your funding?
Cannabis businesses require capital to pursue growth opportunities just like every other business. Our borrowers are currently using their funds to expand grow facilities, open retail locations and grow the distribution footprint of a regional cannabis-industry publication.
Our borrowers have experienced 4-10x revenue growth following investments from Good Tree Capital.
Don’t take our word for it. Hear their stories.
Who does Good Tree Capital lend money to?
We target licensed cannabis operators, whether they’re cultivators, manufacturers, distributors or retailers. We also lend to ancillary businesses that don’t touch the plant, but support the industry.