Leading cannabis operators Kiva Sales & Service, Lowell Farms, Nabis, Sunderstorm, and other key industry players in the world’s largest legal market have come together to form Financial Stability for California Cannabis (FSCC), a new coalition composed of industry stakeholders.
Between wholesalers, consumer brands, and producers, FSCC represents dozens of operators and brands ranging from smaller businesses to large corporations, with roughly 45% of the state’s industry by sales volume.
The purpose of this coalition is to raise awareness and offer solutions to severe credit issues that threaten the stability of the cannabis industry. Members hope to push for legislation and regulations to protect businesses from long wait times when it comes to payment for services or goods. Too often, companies or distributors are left waiting for months to receive payments, which can damage the health and longevity of their business.
“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, California’s largest wholesale platform. “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 pledged to support AB 766, a bill that seeks to institute maximum credit terms between licensees in California’s cannabis industry and grant the Department of Cannabis Control oversight powers. This bill would apply to all license types, ensuring timely payment for goods and services regardless of cannabis business type. The coalition believes this legislation is essential for the future of the state’s cannabis market and requests its approval by the committee.
“For years, restrictions at the federal level have left our state’s legal cannabis operators with limited options for financing and capital. This has led to a severe debt bubble across the supply chain from cultivators all the way through to the retailers,” said Assembly member Phil Ting (D-San Francisco), author of AB 766. “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.”
Reason For Creating The FSCC
Cannabis businesses and distributors in the state of California have long struggled with severe credit difficulties due to slow payment from suppliers, brands and retailers. This can lead to several issues, such as cash flow shortfalls, high debt burdens, and difficulty securing capital to re-invest in their business. These slow payments create an unstable environment for businesses operating in the industry.
“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 and FSCC coalition founding member Sunderstorm, an infused-product manufacturer. “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.”
The root cause of these slow payments is often linked to a lack of incentives for larger corporations or investors when it comes to paying vendors on time. In addition, many businesses are hesitant to offer extended credits due to the risk that they may not be able to recoup their costs if the vendor folds or fails to repay them within an acceptable period of time.
The FSCC coalition is committed to addressing these issues through legislation such as AB 766, ensuring that payment terms for goods and services provided within the cannabis industry are fair and consistent. This will not only help protect businesses from costly delays but also create a stable environment for all parties involved in the industry.
“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,” explains Mark Ainsworth, CEO and Co-Founder of Lowell Farms, a California-based cannabis industry leader and a founding member of the FSCC coalition. “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.”
A full list of the coalition members includes: Kiva Sales & Services, CannaCraft, Calyx Peak, FundCanna, Glass House Group, HERBL, Lowell, Nabis, Sunderstorm, The Parent Company, Petalfast with support from Cannabis Distribution Association.
AB 766
AB 766 is a bill that seeks to institute maximum credit terms between licensees in California’s cannabis industry and grant the Department of Cannabis Control oversight powers. This bill would apply to all license types in California’s cannabis industry, ensuring timely payment for goods and services regardless of business type. Critically, this legislation seeks to protect businesses from long wait times when receiving payment for services or goods rendered.
AB 766 would require a licensee who sold or transferred goods to another licensee and who has not received payment in full 15 days after the final date outlined in the invoice to report the unpaid invoice to the DCC.
It would also require the DCC to notify a licensee of this report. It would require the department to issue a notice of warning or, at its discretion, issue a citation or commence disciplinary action against the licensee if the licensee fails to pay the outstanding invoice in full by 30 days after this notification.
The DCC could commence disciplinary action for multiple failures to comply with these provisions. The bill would prohibit the licensee from purchasing goods and services from another licensee on credit until the licensee pays the outstanding invoice in full. For purposes of these provisions, the bill would prohibit the final date set forth in an invoice for payment of the invoice from being later than 30 calendar days from the date the goods or services are sold or transferred.
In short, AB 766 has the potential to make a massive difference in the stability of businesses within California’s cannabis industry. The FSCC coalition is committed to supporting this bill and raising awareness about its importance for cannabis businesses operating in the state’s market. By approving this legislation, lawmakers can help protect these businesses from costly delays and create an environment where everyone can thrive.
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