Member Post: The Bank Black Program

By Cimone Casson, Cannas Capital Holdings

Social equity programs are designed to address historical and systemic inequalities but often face various specific and unique challenges that can impede their effectiveness. Despite many attempts across the country, social equity programs have yet to make the impact needed to change the trajectory of equity and equality in the commercial cannabis industry. To tackle social equity’s biggest hurdles, we have to understand two things: there is profit in diversity, and investing in minority companies is a long-term play. Although access to capital is one of the biggest obstacles that social equity awardees face, they are much bigger and divergent. Let’s discuss some of the reasons that social equity programs have not moved the needle or made an impact on emerging and sustainable minority ownership in cannabis.  

Of course, the elephant in the room is access to capital issues. This is a major problem. Many social equity programs are underfunded, which limits their ability to provide the necessary resources and support to the target populations. More states have adopted state-funded cannabis grants and limited lending programs, but this structure lacks the investment resources to credit sustainable businesses. Grants and small-scale forgivable loans under $200,000 are a great steppingstone but these businesses need to establish consistent fundable business credit profiles. More banks and financial institutions have entered the cannabis space (under U.S. Department of Treasury guidelines established in 2014 and Federal Reserve Bank guidance established in 2015) and are considering lending opportunities but they need creditworthy businesses to give them more of an incentive to offer loans. Additionally, once the banking regulatory climate changes, which it will, commercial cannabis companies must be ready to take advantage of capital opportunities. 

Next, many programs are designed with short-term goals in mind and may not address the root causes of inequality, which require long-term and sustained efforts. Investing in minority businesses is a long-term play. We expect minority businesses to be an overnight success, despite deeming them economically, socially, or geographically disadvantaged or to have somehow magically overcome racial and gender-based structural barriers to business entry, scaling, and sustainability that still exist. These expectations are unrealistic, the success of this industry is in inclusion. Achieving this will take the adoption of joint venture programs, supplier diversity initiatives, public and private partnerships, and strategic business planning, that have worked in other industries. We must accept the reality of social economics, in which every culture has a relationship with money. Persistent economic disparities undermine the efforts of social equity programs, as economic inequality often intersects with other forms of social inequality. Understanding the habits, views, and relationships with funds for these disadvantaged communities’ groups can aid in establishing stronger pathways to leveling the playing field and developing general wealth. 

If we truly wish to overcome the many roadblocks failed social equity programs face, we have to reexamine creditworthiness. Current underwriting metrics create additional hurdles for minority businesses. Many Community Deposit Financial Institutions, banks, and lenders will have to think about credit differently and set up various avenues and pools of capital to assist diverse businesses. I suggest adopting a socio-economic underwriting system such as Cannas Capital Holdings’s Bank Black Program. Our mission is to bridge the wealth gap via four pillars Social Equity, Social Economics, Social Entrepreneurship, and Social Enterprise. We have designed an AI operating system that will perform underwriting solutions developed with unique metric criteria that consider the disadvantages and advantages of offering provisions for diverse business owners to develop social enterprises in our communities.  In addition to many traditional underwriting requirements such as Management Team, Payment History, and Collateral Support, we also employ Community & Demographic Analysis, Social Capital Assessment, Institutional Support, Risk Mitigation Strategies, Long-Term Sustainability, Regulatory Compliance, and Continuous Monitoring as underwriting standards.

Improving the effectiveness of social equity programs often requires addressing these challenges through better funding, streamlined processes, robust data collection, community engagement, and a commitment to long-term, systemic change.