Exclusive Interview with Safe Harbor Financial Founder and CEO Sundie Seefried
Safe Harbor Financial has been providing banking services to the cannabis industry since 2015. Over the past seven years, the company has processed $12 billion. Today, it has nearly 600 accounts. Founder and CEO Sundie Seefried spoke with New Cannabis Ventures about Safe Harbor’s business model, going public and consolidation in financial services for cannabis.
Listen to the entire interview or read the summary below:
A Banking Background
Seefried has been working in the credit union and banking space since 1983. She was planning for retirement in 2014, but she started to do some research on the cannabis industry. Colorado had just launched adult-use, and she saw an opportunity to solve banking challenges for the state’s operators. Those original clients began to grow and land licenses in more states, and Safe Harbor followed them to provide banking services in those additional markets.
The Safe Harbor leadership team has decades of experience in banking. Vice President of Compliance Margaret Williams comes from the banking industry. Vice President Amanda McComb has been with the company since 2015; she was Safe Harbors first banker. Donnie Emmi serves as the company’s internal legal counsel, and he brings his experience in the cannabis industry to the team. Chief Investment Officer Paul Penney will be leading Safe Harbor’s lending program, and Chris Fameree is coming on board as CFO.
Safe Harbor operates with a partner financial institution: Partner Colorado Credit Union. The company serves as the fintech interface between clients and its financial institution partner. Safe Harbor operates with a private banking model, which means clients work directly with a private banker. Safe Harbor plans to add more partner financial institutions.
Market Reach Today
Today, Safe Harbor’s market reach spans 20 states. Last year, the company banked approximately $4 billion in cannabis-related funds, according to Seefried.
Safe Harbor signs NDAs with its clients, many of whom are concerned about protecting their business models and IP, according to Seefried. Initially, she expected that the majority of Safe Harbor’s clients would be mom-and-pop cannabis operators. The company’s client pool does include those smaller operators, as well as large MSOs. Safe Harbor continues to expand the types of licenses it banks, according to Seefried. For example, the COVID-19 pandemic sparked an increase in delivery licenses. Safe Harbor has an actionable pipeline of approximately $500 million.
The company announced plans to go public by merging with SPAC Northern Lights Acquisition Corp (NASDAQ: NLIT) in a deal that was announced in February. Initially, the Safe Harbor team wasn’t necessarily pursuing a SPAC vehicle. Rather, they were looking for a way to decouple its banking program from Partner Colorado Credit Union. The Safe Harbor program has gotten so large over the past seven years that it was taking up too much of Partner Colorado Credit Union’s balance sheet and time, according to Seefried.
The team connected with Luminous Capital, which has walked Safe Harbor through the entire SPAC process. At this point in time, the transaction is subject to SEC approvals. Seefried is hopeful that the process will move forward by the end of the second quarter.
Funding and Capital Allocation
Safe Harbor has $5 to $6 million on its balance sheet, according to Seefried. The company is gearing up to go public, and it is looking at ways to invest in marketing, advertising and business development. Thus far, the company has used word of mouth to grow its business.
Additionally, the Safe Harbor team is considering ways to consolidate financial services in the cannabis sector. The team wants to put together a platform that offers great efficiency and reduced pricing. The company will be considering deals that will allow it to expand into to include investment services, insurance services, broker dealer services and, potentially, payment processing and courier services. Safe Harbor is aiming to become a one-stop-shop for the cannabis industry, according to Seefried.
SAFE Banking does eliminate some risk for financial services providers in the cannabis industry, but it does not eliminate federal illegality. If and when this legislation passes, it will remove the risk of prosecution and eliminate the risk of exclusion from services like insurance coverage, according to Seefried. But the Banking Secrecy Act (BSA) remains a risk in the cannabis industry. Safe Harbor is careful to meet its BSA regulatory requirements. It has undergone 16 state and federal exams, according to Seefried.
Even when federal legalization comes to pass, Seefried foresees banking challenges. Following federal legalization, cannabis will likely remain a cash-intensive industry, much like the alcohol and tobacco industries, according to Seefried. This will make it difficult for cannabis operators to access banking services. Additionally, a thriving illicit market will make illicit dollars entering the financial system a concern.
The Road Ahead
Safe Harbor started to explore lending in 2021. Seefried expects lending to be a big income producer in 2022 and an even bigger driver of growth in 2023.
As Safe Harbor grows, the team tracks client retention and account growth. It has clients who have been with the company for its entire seven-year history. It will be watching account growth as it bolts on more services to its platform and grows its relationship with clients.
This year, Safe Harbor will be navigating the challenges that come from transitioning from the private realm to the public. The company is hiring staff to help it manage that process, and its board is growing from three members to seven. Entering the public realm also means Safe Harbor will have more access to capital, which will help it to fuel its expansion of services.
To learn more, visit the Safe Harbor Financial website. Listen to the entire interview: