To continue our interview series, we are featuring a new interview with banking industry veteran James Daley, Senior Vice President and Director Structured Finance at Needham Bank. The new Structured Finance team provides customized financing solutions of $10 million or more to support the growth plans of businesses headquartered primarily in Massachusetts.

1. Can you describe Needham Bank’s role in the cannabis industry and your role at Needham?

Needham Bank is providing senior secured debt facilities, ranging in size from $3,000,000 to $75,000,000. This capital is used by both direct and indirect cannabis companies for a variety of applications.

At Needham Bank, I manage all of Commercial and Industrial Banking (lending and treasury) and all of Cash Management for the Bank. Cannabis lending rolls up through one of my teams, Structured Finance. 

2. Does Needham Bank target particular cannabis businesses to lend to? What are some common features of the businesses that Needham invests in? 

For lending inquires we are focusing on Multi State Operators (“MSOs”) and large regional direct and indirect cannabis companies. We are staying away from Single State Operators. For treasury opportunities, the Needham Bank team is looking to support operators that have an up-and-running business, slightly past the infancy stage, with a primary focus similar to the lending strategy for large scale, regional, and MSO operators.

3. What are some subtle “red flags” that might deter you or your team from investing in a potential opportunity?

When we see business plans that set unrealistic expectations. Many operators new to the industry think they will be profitable overnight. That is hardly the case. 

4. What would our readers find surprising about lending to cannabis businesses? 

The debt instrument is really basic and straight forward. It is not complicated at all.

5. What are some important lessons you’ve learned as a lender in the cannabis industry, and how have those lessons impacted your team’s current strategy?

Don’t overspend! Operators are spending way too much money to get their business off the ground. Keep plans simple. Focus on operations, focus on margins. These facilities are NOT real estate loans. They are operating businesses that require constant production, oversight, and management. We look at construction budgets very closely, and we upgraded our construction engineer program to take a finer look at budget and building processes to ensure clients are not overspending, are staying on budget, and to ensure they are staying on time.