Marijuana-focused lender Chicago Atlantic BDC has locked in a $100 million senior secured revolving credit line, further solidifying its position in cannabis financing. The deal, led by an FDIC-insured financial institution, gives the company fresh liquidity to expand its portfolio in a sector where traditional banks remain hesitant.
Loan Terms and Strategic Impact
The loan, maturing in March 2028, carries an interest rate of SOFR (Secured Overnight Financing Rate) plus 3%, a structure often seen in institutional lending. Unlike standard corporate borrowing, cannabis-related financing often comes with higher risk, making this deal noteworthy.
Scott Gordon, executive chair and co-chief investment officer, highlighted the significance of the credit facility, stating:
“With no current debt outstanding, the Credit Facility provides us with significant liquidity and the flexibility to grow the Company’s portfolio as we seek to capitalize on the robust lending opportunities in the originations pipeline.”
The move is timely. With cannabis legalization advancing across various states, demand for financing remains high. Chicago Atlantic BDC now has a stronger balance sheet to deploy capital strategically in the industry.
Growing Dividend and Market Position
Investors tracking Chicago Atlantic BDC saw a dividend increase in December, when the company announced a 34-cent per-share payout for Q4 2023. That marked a 36% jump from the 25-cent dividend in the previous quarter, a signal of confidence in its earnings growth.
The company isn’t new to transformations. Last October, it adopted the Chicago Atlantic BDC name after acquiring a portfolio of loans from Chicago Atlantic Loan Portfolio, an Illinois-based lender. Previously, the firm operated as Silver Spike Investment Corp., initially a SPAC focused on marijuana investments. Over time, Silver Spike expanded its investment scope beyond cannabis to include health and wellness sectors.
Now, however, Chicago Atlantic BDC is doubling down on marijuana financing, branding itself as the only publicly traded business development company (BDC) dedicated to the U.S. cannabis industry.
The Challenge of Cannabis Lending
Securing traditional bank loans remains a major hurdle for cannabis operators due to federal restrictions. Large banks and financial institutions often steer clear of the sector, leaving companies to seek financing from private lenders, credit funds, and specialized BDCs like Chicago Atlantic.
A few key points about cannabis financing:
- Limited banking access: Federal prohibition means most banks won’t offer loans to cannabis businesses.
- Higher interest rates: Cannabis lenders typically charge higher-than-average rates due to regulatory risks.
- Alternative financing sources: Private credit firms, hedge funds, and specialty lenders like Chicago Atlantic BDC fill the gap.
The ability to secure a credit line from an FDIC-insured financial institution is a big step, reinforcing Chicago Atlantic’s credibility in an industry that still struggles with financial restrictions.
Stock Performance and Market Presence
Chicago Atlantic BDC’s shares trade on Nasdaq under the ticker symbol LIEN, a reference to its role in secured lending. While the company operates in a niche market, its public status allows investors to gain exposure to the cannabis credit market—something not widely available through traditional investment vehicles.
As legalization discussions continue at both the state and federal levels, companies like Chicago Atlantic BDC are positioning themselves as key financial players in an industry desperate for capital. With a fresh $100 million in financing, the company now has more firepower to expand its loan portfolio and increase shareholder returns.