Investment Process

The financial due diligence process is a fundamental tool for achieving our strategic objectives. We have developed a disciplined, repeatable, and scalable process that allows us to identify, underwrite, structure, and monitor high-quality loan investments. Our partnership opportunities are identified, screened, underwritten, documented, approved, and monitored using the following process, which is led by the Investment Committee.

We originate opportunities through long-established relationships with professional referral sources and previous borrowers, modern direct and digital marketing, traditional sales, and industry conferences.

Underwriting relies on gathering information on the borrower and industry, structuring financial and operational covenants, and credit enhancements to enable us to closely monitor the borrower as well as plan exit strategies that enable us to recover principal in the event of a default. Our underwriting process has been successful.

  • The process is broken down into several stages:

  • 1. Pre-Screening

    The Investment Committee uses a macro and micro approach to evaluate investment opportunities based on borrower location and market characteristics, collateral coverage and quality, cash flow metrics, management experience, operational performance metrics, risk/return characteristics, as well as their position within the existing or targeted portfolio as a whole.

  • 2. Interim Approval

    Based on the pre-screening process, the Investment Committee determines if a term sheet can be issued under the recommended structure or if any changes need to be made to structure or pricing to enable it to be issued.

  • 3. Term Sheet Issuance

    After interim approval, a term sheet is issued and negotiated with the prospective borrower (in conjunction with Investment Committee review and approval of any such updates to the term sheet). Upon the prospective borrower signing a term sheet, the borrower typically pays for due diligence expenses with a due diligence deposit to start pre-loan work.

  • 4. Due Diligence

    Due diligence activities may include appraisals, environmental site assessments, background checks, review of anti-money laundering protocol, bank statement reconciliations, and a review of personal financial statements. For cannabis-related loans, we conduct extensive regulatory due diligence on each borrower to ensure compliance with applicable state cannabis laws and not violating certain federal priorities with respect to cannabis set forth in applicable U.S. DOJ memoranda.

  • 5. Underwriting Memo and Preliminary Investment Committee Approval

    The Underwriting Memo compiles all due diligence items and is presented on our underwriting template for approval by the Investment Committee.

  • 6. Documentation

    Once approved by the Investment Committee, preparation of legal documentation begins. If the borrower chooses to expedite the loan process, it may provide an additional deposit to dual track the preparation of legal documentation while the due diligence process is completed. Throughout the process, the investment team will negotiate tightly structured loan documents with review from outside legal counsel.

  • 7. Final Investment Committee Approval and Funding

    Upon completion of full underwriting and the legal documentation, the investment team prepares a final investment memorandum, which confirms or highlights any variances from the preliminary Investment Committee approval. Following Investment Committee approval, the investment is approved with funding subject to execution of the respective legal documents.

  • 8. Portfolio Management

    We monitor operational data points, financial performance, and regulatory compliance of borrowers. Financial and operational covenants support the loan monitoring process and are designed as leading indicators to identify and mitigate potential defaults. In addition, we monitor aggregate exposures of the portfolio with respect to geographical and property diversification.

In summary, our investment process is a disciplined, repeatable, and scalable approach that has allowed us to identify, underwrite, structure, and monitor high-quality loan investments. We have a successful track record in this area, and we will continue to refine our process to ensure we deliver positive results for our investors.