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About

Who is Good Tree Capital?

Good Tree Capital is a financial technology firm that grants loans to vetted, licensed cannabis companies. We believe fair access to capital is an essential ingredient to building wealth, and we employ innovative technology to fight for financial empowerment for all.

Since our founding in 2015, we have placed considerable emphasis on building an algorithm that assesses credit risk only using the factors with predictive value (e.g. monthly income, years in business) while avoiding factors with no predictive value (e.g. gender, race). The result is our core competitive advantage--an automated credit risk algorithm that determines the likelihood of default with significantly more accuracy, speed and at a lower cost than traditional banks.

Why was Good Tree Capital founded?

Currently bank lending relies heavily on human decision-making. When you apply for a loan, the loan officer sitting across from you is bringing all of their conscious and subconscious bias to the vetting process. Consequently, their decisions are not based solely on empirical creditworthiness and financial merit, which can affect a person’s fair access to capital—the number one barrier to obtaining financial freedom.

Our Founder and CEO, Seke Ballard saw the inherent flaws in this process and knew that he could build a solution that removed the human element from the equation. So in 2015, he gathered an amazing team of data scientists and software developers from Amazon, and spent the following two years building and testing a proprietary algorithm that automates loan application intake and risk evaluation. When he was launching his technology in the wider banking industry, he moved his focus to cannabis where there was an opportunity to bring his vision, Good Tree Capital, to life.

Why invest in the cannabis industry?

The root cause of this problem is the disharmony between federal and state laws governing cannabis. Despite the growing list of states decriminalizing the sale of cannabis, the federal government maintains its classification of cannabis as a Schedule 1 drug, alongside heroin and crack cocaine. Accordingly, federal law aims to thwart criminal money laundering activities by barring financial institutions from maintaining accounts with Schedule 1 drug-related businesses. At the same time, the federal government has recognized the incongruence between federal law and the unmistakable trend toward universal state-by-state decriminalization of the drug, and has passed legislation to provide industry participants with some measure of legal protection. Despite this, the majority of banks are still unwilling to take the added risk—perceived or otherwise—of banking this booming industry. Without bank accounts, cannabis companies are unable to secure bank loans, accept debit or credit card payments from customers, or electronically remit payment to suppliers or employees. As such, we believe that there is $1 billion in unmet demand for small business lending within the cannabis industry.

What is the cannabis market opportunity?

Cannabis companies are primarily all-cash ventures. According to a Marijuana Business Daily survey, 60% of all firms operating in the cannabis industry don’t have business banking accounts. That number is 81% for companies that touch the plant and 49% for non-plant touching, ancillary firms.

The root cause of this problem is the disharmony between federal and state laws governing cannabis. Despite the growing list of states decriminalizing the sale of marijuana, the federal government maintains its classification of marijuana as a Schedule 1 drug, alongside heroin and methamphetamines. Accordingly, federal law aims to thwart criminal money laundering activities by barring financial institutions from maintaining bank accounts with Schedule 1 drug-related businesses.

Even so, the majority of banks are still unwilling to take the added risk—perceived or otherwise—of banking this booming industry. Without bank accounts, cannabis companies are unable to secure bank loans, accept debit or credit card payments from customers, or electronically remit payment to suppliers or employees. The unmet demand for small business lending within the cannabis industry represents a billion dollar opportunity. This is only set to increase as the industry is projected to grow to $70.6 billion by 2028.

What is Good Tree Capital's solution?

Good Tree Capital’s approach to solving the industry’s billion-dollar debt financing supply gap is to create an accessible online platform that enables any applicant—whether they are a cultivator in California, a manufacturer in Nevada or a medicinal retailer in Illinois—to quickly apply for a loan and receive a response immediately. Loans provisioned using our model result in more accurate and equitable financing decisions.

Why is our technology important to borrowers and investors?

Our proprietary algorithm leverages big data and machine learning to determine the likelihood that an applicant will default on a loan. The algorithm was developed by running random forest regression analysis against 1.2 million business loan records obtained from the U.S. Small Business Administration using a Freedom of Information Act request. We determined—statistically—which factors among the individual borrower profile attributes (e.g. monthly revenue, years operating, past delinquencies) are most predictive in determining whether an applicant will default. Going further, we determined the relative weighting of each attribute.

The result is an algorithm that determines credit default risk with 98.2% accuracy, implying a 1.8% average default rate. This represents a significant improvement over traditional banks. By comparison, between 2006-2015 the Small Business Administration reported a 17.6% default rate. In 2007, one year before the Great Recession gained steam, the Small Business Administration reported a 10-year default rate of 23.6%. Because our loan decisioning methodology is entirely data-based and automated, we are able to accurately filter out the most promising deals and scale with low incremental costs.

What is Good Tree Capital's approach to lending?

Given our focus on automating and lowering our cost of evaluating applicants, we are able to charge below-market interest rates to borrowers and still deliver above-market returns to our investors. For Good Tree Capital loans, our APR typically ranges between 8-15%, compared to 30-40% cost of capital for those seeking debt financing elsewhere.

Specifically, we finance equipment purchases, working capital, real estate acquisition or construction projects. Borrowers may choose loan terms up to 36 months. All loans are personally guaranteed by the owner(s) and secured with assets valued at no less than 120% of the value of the loan. Our goal is to maximize our ability to preserve capital in the event of a default. In fact, Good Tree Capital’s interest is contractually senior to other debt holders, which means Good Tree Capital is paid first in the event of insolvency.

How successful is Good Tree Capital?

Since launching the borrower platform in 2017, Good Tree Capital has issued loans to qualified and diverse cannabis companies in Washington, Oregon, Colorado, California and Massachusetts. We lend to businesses with demonstrably strong financial and operating performance—leading to a portfolio of borrowers who have virtually no debt on their balance sheets, have been in business an average of 7.5 years and consistently deliver above 30% profit margins before taxes.

The average provisionally approved borrower has a personal credit score of 758 and an 18% debt-to-income ratio. All loans are personally guaranteed by the business’ owner(s) and secured with assets valued at no less than 120% of the value of the loan. Our borrowers are prime borrowers with exceptional financial and operating track records.

Since then, we have shifted our focus to seize the opportunity in Illinois’ emerging market. In an effort to lower the financial barriers to entry for regular citizens, Illinois lawmakers created the Cannabis Social Equity Loan Program. Due to our impressive track record, the Illinois Department of Commerce and Economic Opportunity, the State regulator charged with managing the Program, has awarded a contract to Good Tree Capital to originate and service loans from the Program on its behalf.

With this Program, we will be able to seize our goal of supporting Illinois’ creation of the most equity-centric cannabis market in the nation.

Investing

How do I invest with Good Tree Capital?

We have an online platform that offers an entry-point for accredited investors to diversify their investment profile with an investment in the cannabis industry and also allows cannabis businesses to apply for loans.

Investors commit to a sum and Good Tree Capital applies a 2.5% fee to cover our operating expenses.
The remaining 97.5% of investors' funds are used to make loans. We identify low-risk applicants using a specially-developed algorithm that considers detailed financial performance, longevity and available collateral.
Approved borrowers make monthly repayments, which are distributed back to investors quarterly.

That’s it. There are no hidden fees or hard-to-understand terms.

What is an accredited investor?

To qualify as an accredited investor, an individual must satisfy one of the below conditions:

Earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and a reasonable expectation of the same for the current year, OR
Has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence), OR
Has a professional certification, designation, or credential issued by an accredited education institution (ie. Series 7, Series 65, or Series 82 licenses)

We verify the accredited status of investors participating on our platform.

Click here for more information about accredited investor requirements.

How do I invest online?

It’s simple.

Fill out our online application form and create an account.
Let us know how much you would like to invest and provide us with your payment method. We accept ACH or wire transfers from your bank. Don’t worry, we don’t store your information.
Visitor your online dashboard to review the performance of your investment.

What is the minimum to invest?

The minimum to invest is $10,000. Investors may only invest in $10,000 increments.

Good Tree Capital’s current average investment is $30,000.

What kind of ROI can I expect?

Investors can expect 8% fixed, and up to 15% in annual returns. Investors receive both quarterly and annual distributions throughout the Fund’s 3-year investment term.

While we are confident in our projections, the SEC does not permit us to guarantee returns.

For more detailed financial information, please download our PPM.

How does Good Tree Capital make money?

Good Tree Capital charges a one-time, up-front fee of 2.5% of your initial investment; the remaining 97.5% is loaned out to our borrowers. When borrowers make loan payments, we return those payments to investors via quarterly distributions. Once investors have received their initial investment amount, distributions are split 80% to the investor and 20% to Good Tree Capital.

How do I exit my investment, or withdraw funds?

Investors may withdraw their funds - without penalty - up to 30 days after their initial investment.

After the 30-day grace period, your investment will be deployed to qualified borrowers and is locked for the duration of the loan term of 3 years. Investors will receive 8 quarterly distributions beginning year 2 of the investment.

Am I investing in the loan of a single borrower?

No. You are investing in a pool of funding that is loaned out across licensed cannabis businesses in Illinois and other states.

What type of companies do you loan money to?

Our borrowers are people who traditionally don't have access to capital, and we take pride in the fact that we are helping them make their dreams a reality. By investing in our borrowers, you are giving them the financial freedom to scale their businesses in a market that provides them with limited options.

How risky is this investment?

Investing in asset-backed loans to cannabis companies is one of the safest ways to earn returns in the industry.

Borrowing

Are there funds available for non-Illinois Social Equity Applicants?

At this time, no. However, you can still apply with us and we will keep your information on file and contact you when we have funds available.

Can I apply to GTC first before getting DCEO approval?

Yes, you can complete our application, but you can not receive final approval or access any funds until you have received DCEO approval. Find the DCEO application here.

Can I apply for more than one loan?

To ensure funds and access to capital to as many Social Equity applicants as possible, we can only grant one loan at a time for each eligible applicant for the duration of your loan term. You can apply again once your term is completed and your loan is paid back.

How do businesses currently benefit from your funding?

Cannabis businesses require capital to pursue growth opportunities just like every other business. Our borrowers are currently using their funds to expand grow facilities, open retail locations and grow the distribution footprint of a regional cannabis-industry publication.

Our borrowers have experienced 4-10x revenue growth following investments from Good Tree Capital.

Don’t take our word for it. Hear their stories.

How do I apply for a loan?

Applying through Good Tree Capital is fast, easy, and confidential.

Complete the online application. We ask for details about your business to complete the application. You will receive an immediate notification if you are provisionally approved or rejected.
Hold tight while we review your application. In some cases, we may ask questions or request additional documents that help us verify your business and its financial position.
Receive your loan or open your line of credit.

Loans: Once a loan is approved, the funds are electronically deposited into your bank account. Depending on your bank, this can take a few days.
Lines of Credit: Once your line is opened, it is immediately available for draws. Email support@goodtree.capital to request a draw of funds.

What is the process for applying with multiple business owners?

Currently our loan and line of credit products allow for multiple people to serve as a Guarantor. The Guarantor is the individual person who is guaranteeing that the business financing will be paid off if something happens to the business.

What is a line of credit?

A line of credit lets you borrow (draw) the amount you need as you need it. There are no fees to open a Line of Credit through Good Tree Capital, and you make payments only on the credit you've actually used. A line of credit works best for periodic, short-term needs for an infusion of cash.

For example, if you have a $50,000 line of credit and withdraw $10,000, your credit limit will drop to $40,000. Once you repay that $10,000 (plus any applicable interest and fees), the amount of credit available returns to $50,000.

For more information on determining if a Line of Credit or Traditional Term Loan is better for you contact us.

How do you qualify for a loan?

To qualify for business financing through Good Tree Capital you must meet the following requirements, in addition to credit qualification criteria:

Owned the business for at least 6 months
Currently be at least a 20% owner of the business
Be at least 18 years of age
Be a United States citizen or permanent resident, or living in the U.S. on a valid, long-term visa
Have a valid bank account and email address

The applying business must:

Have made at least $15,000 in sales in the last 6 months*
Operate in the United States

Your business financing cannot be used for financial investing, lending, gambling or illegal activities. Cannabis companies duly licensed by their State and/or municipality are considered legal.

For Illinois social equity licensees, to qualify for a loan, you must first receive approval from the Department of Commerce and Economic Opportunity. Complete their Social Equity Loan Program application here.

Will applying affect my personal credit score?

No, applying through GoodTree Capital won’t affect your personal credit score.

How long does it take to get approved?

Once you complete your online application, you will be immediately notified if you are provisionally approved or rejected. After the application is submitted, the entire approval verification and funding process takes on average 10 business days. In some cases, it can take a longer.

Loans: Once a loan is approved, the funds are electronically deposited into your bank account. Depending on your bank, this can take a few days.

Lines of Credit: Lines are available to be drawn immediately after approval.

Avoiding delays: To help keep things moving as we verify the details of your application and business, please send requested information/documents in a timely manner. If you have any questions about the status of your application please contact us at support@goodtree.capital.

What is acceptable collateral?

Residential or commercial real estate, your bank accounts (e.g. savings account or certificate of deposit), investment accounts, equipment & machinery or equity in the borrowing entity.

We sometimes require a blanket lien on business assets (a 'UCC lien') if your application is deemed risky. In the absence of business assets, we may require personal real estate other personal assets as collateral.

Filing these liens helps keep interest rates lower, and gives Good Tree Capital the confidence to invest in your business.

What is a personal guaranty?

A Personal Guaranty means that if the business is unable to repay, the burden of the debt is shifted to you as an individual guarantor of the line or loan.

Personal Guaranties are required on all small business financing. Personal Guaranties help keep interest rates lower, and they give Good Tree Capital the confidence to invest in your business. As a guarantor, late payments, missed payments, or other defaults on the account may be reflected in your personal credit report.

How much can I borrow and what are the fees?

Loan amounts range from $1,000 - $250,000

Interest rates range from 12% - 25%

There is a one-time origination fee from 0.99% - 1.49% is taken out of the loan proceeds.

How do you calculate interest?

Interest is calculated daily on the basis of a 360-day year with 12 months, each of which is 30 days (or 30/360) long, regardless if a month has more or less than 30 days.

There are a few advantages of getting a loan through Good Tree Capital:

You aren’t charged a fixed cost for interest. The amount of interest you pay is related to the outstanding principal for your loan. (Fixed-cost interest, which many lenders use, is usually much more expensive than our approach to interest.)
You aren’t charged all of the interest on day one, regardless of how long you keep the money. (That practice, used by many alternative lenders, doesn't allow you to save money by paying your financing off early.)
You aren’t charged interest on the interest you owe, unlike a credit card.

What kinds of supporting documents will I need to provide?

Here are some of the things we might request:

Business Tax returns. We use these to verify your income and sales. We may ask for copies of your recent tax returns, or for tax forms, such 1099s or Schedule K1s to verify all of the details.
IRS 4506-T form. We use this form to request copies of your tax returns, W-2, and 1099 forms directly from the IRS. A completed form can quickly help us verify your income. Proof of income. We may ask for additional documents to verify your business income, such as recent bank statements or copies of invoices.
Proof of identity and address for you or your business. We may request a copy of your government-issued photo ID, recent utility bills, or other documents to verify your business and personal identity and current address.

What is the 4506-T form?

This form gives us permission to request a copy of your tax return from the IRS. We use it to verify the accuracy of the financial information you entered on the application. There’s no charge to you.

Are there any fees or penalties for loan prepayment?

You can partially or fully prepay your loan or line of credit at any time with absolutely no prepayment penalty or fee.

Any payments made in addition to your contractual monthly payment will be applied towards a reduction in the principal balance of your loan or line. Additional payments towards your principal balance allow you to repay your loan or line early by reducing the total amount of interest you'll pay. A full prepayment of your outstanding principal balance, plus any accrued interest or fees, will pay off your loan or line and bring an end to your monthly payments.

How do I make payments?

We prefer borrowers to submit repayments electronically. Once you are approved, we will supply you with the appropriate account and routing information to facilitate submitting your monthly payments electronically. If you are not able to make payments electronically, you may also mail a check with your company name via standard mail to the following address:

Good Tree Capital
222 W. Merchandise Mart Plaza
P.O. Box 4071
Chicago, IL 60654-4071

How do I pay off my loan?

If you're ready to pay off your loan, congratulations! That's a big achievement. Once you pay off your loan, you won’t owe any additional interest and your monthly payments will end.

Please contact us to schedule the payoff details based on the day you want to pay off your loan and how you’ll send the payment. The simplest way to pay off your loan is through an ACH transfer from your linked bank account to Good Tree Capital.

If you prefer to pay by check, you can send us your check payment either by postal or courier mail. We’ll give you a payoff amount that is valid for the next 14 days, giving time for your check to reach us.

Standard mail

Mail a check with your loan number via standard mail to the following address. (Don't forget to write your loan number on your check):

Good Tree Capital
222 W. Merchandise Mart Plaza
P.O. Box 4071
Chicago, IL 60654-4071

Will it hurt my credit score if my loan application is declined?

No. When you apply through Good Tree Capital, we use a soft credit inquiry to understand your credit history. This type of inquiry doesn’t affect your credit score. Although you can see it on your credit report, rest assured that creditors and others who view your credit report won’t.

Why was I declined?

You will receive a rejection or provisional approval immediately upon submitting your application online. If you have been provisionally approved, your application will need to be manually validated, a process that typically takes 1-2 weeks. If you don’t send us the documentation, or if your documents don’t match the information on your application, you will be declined. We understand that when that happens, it’s really frustrating. However, the trade-off is a streamlined process where you get a decision quickly and don't waste time if you don't qualify. If you are approved, you will receive the loan and letter of credit after we have validated your information.

How do I get a copy of my credit report?

Although we don't share your credit report with you, you can get a free copy from a credit bureau:

TransUnion: https://www.transunion.com/

Equifax: https://www.equifax.com/

Experian: https://www.experian.com/

If your application for credit is declined, the notice of adverse action you'll receive from Good Tree Capital will include the contact information you'll need to obtain a copy of your credit report.

Legality & Security

Is there a legal risk in investing in the cannabis industry?

Good Tree Capital does not touch the plant, which means we are not subject to the same enforcement risks as those who touch the plant.

At the same time, the federal government has recognized the incongruence between federal law and the unmistakable trend toward universal state-by-state decriminalization of the drug. In an effort to provide industry participants with some measure of legal protection, Congress passed the Rohrabacher-Farr Amendment. This legislation prohibits the Justice Department from using federal funds to interfere with the implementation of state medicinal cannabis laws—in effect, shielding the majority of the cannabis industry from federal interference. Perhaps more encouraging is the Secure and Fair Enforcement (SAFE) Banking Act, which will remove federal hurdles to banks providing services to the cannabis industry, irrespective of whether it's medical or adult-use. The bill passed the US House of Representatives in a landslide bi-partisan vote. Passage in the Senate is only a matter of time.

We estimate the legal risk to investing in the cannabis industry, and specifically in Good Tree Capital, to be negligible.

Is my data secure?

Data security is one of our highest concerns, and we take all measures to ensure your data stays safe. Our websites are secured behind an HTTPS protocol, and passwords are stored in an encrypted manner. Don’t worry, we won't save your passwords as plain text. In today's day and age, data breaching has become a trend, and Good Tree Capital has placed the appropriate safeguards in place to help ensure you are not a victim of one of those attacks.

Is my investment secure?

All loans are personally guaranteed by the owner(s) and secured with assets valued at greater than 120% of the value of the loan. We only accept tangible, durable assets such as real estate, equipment and/or operating licenses as collateral.

Good Tree Capital is also contractually senior to all other debt and equity holders, in the event of default. We will liquidate assets to ensure the value of the loan is recovered.

In other words, your investment couldn’t be safer.

How is my money taxed and insured?

Good Tree Capital is a Limited Liability Company subject to “pass-through” tax treatment wherein profits/losses pass through the entity to the individual investor, who will be responsible for paying the necessary taxes. All investors will receive a K1-statement in January of each tax year.

All funds are held at Salal Credit Union in Seattle, Washington. Salal Credit Union is an FDIC-insured bank.

What other measures does Good Tree take to ensure compliance?

An additional challenge is the time and expense of complying with state laws and federal guidance. Notwithstanding current federal law, the Cole Memo lays out principles for financial service providers—specifically those FDIC-insured deposit holders—to follow in order to avoid federal prosecution. These principles add significantly to the regulatory cost of servicing the cannabis industry. In turn, this acts as a major barrier for many banks to provide services. And for the banks that do service the cannabis industry, they pass these significant costs on to cannabis licensees in the form of exorbitant fees and interest rates.

Good Tree Capital retains the legal services of the Regulated Substances Practice at Harris Bricken, a Seattle-based law firm. Our work with Harris Bricken allows us to identify each state’s regulatory compliance requirements in order to collect and report salient data to both state and federal authorities. More importantly, we’ve largely automated compliance data collection, thereby reducing the cost of compliance. Our platform engages 3rd-party data providers to gather background information on approved applicants and the nature of their business; this data is reported to state and federal officials as required.

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