News: Cannabis Trust Score (CTS) and Report: New FinTech Tool for Assessing Financial Health of Cannabis Businesses.
Published 10:00 AM EST, Fri July 07, 2024
The Cannabis Trust Score (CTS) and Report provides a comprehensive credit score and detailed insights into the financial health and credit risk of state-licensed cannabis-related businesses (CRBs). This innovative FinTech platform was developed by Dotan Y. Melech, leveraging his nearly 30 years of experience in asset management, court-appointed bankruptcy, and receivership, particularly with distressed businesses and creditors. This experience highlighted the critical need for improved risk assessment tools for CRBs.
Using a proprietary algorithm, the CTS and Report integrate data from over 1,700 correlation points across 42 business categories and three principal areas—asset, structure, and character. The data sources include Metrc track-and-trace, point of sale (POS) software, company structure documents, and third-party market data. This data is triangulated and benchmarked to a Kappa Index, resulting in a score ranging from 200 to 800.
“CTrust, and its Cannabis Trust Score and Report, provides a technology and data-driven approach to evaluating lending risk for the benefit of the cannabis industry,” said Melech, CEO of CTrust. “The reality is that absent a standardized and trusted formula to measure risk, the industry is unlikely to benefit from expanded access to traditional financing and other financial services even with federal cannabis legalization or rescheduling.”
The CTS and Report ensure comprehensive risk assessment for cannabis lenders and financial partners, instilling confidence in investment decisions and aligning rates appropriately. CRBs benefit from added transparency, enabling fairer loan terms and rates based on the company's specific profile rather than federal or state legalization risk alone.
“CTrust’s Cannabis Trust Score and Report empowers lenders to make more informed cannabis investment decisions that haven’t been possible until now,” said Bob Hoban, CTrust’s founding member, chairman of the board, and global cannabis law expert. “Looking ahead, we see the CTS and Report useful for ancillary professional service companies, such as consultants or insurance, legal, and accounting firms, or even as an early risk keystone for mergers and acquisitions.”
During the 2024 beta program, a limited number of financial institutions that enroll early will receive free access to CTrust’s platform, including CTS and Reports for existing depository accounts, an initial demo, and consultation. This program provides a roadmap for lending policies, loan documents, and objective risk analysis. State-licensed CRBs can apply for a free Cannabis Trust Score during the beta program, requiring documentation such as financial, tax, and corporate records, policies and procedures, and seed-to-sale and POS records.
Source: Financial Regulation News
