Robert HobanCo-Chairman of Cannabis Industry Groupstressed the importance of due diligence in the fast-growing cannabis market.

While participating in the Benzinga Cannabis Capital Conference Earlier this month in Miami, he discussed the two sides of due diligence — one for the company seeking capital and the other for the lenders and investors.

“By having an established due diligence checklist, I can evaluate my business, I can see where I stand when I approach the outside world for a capital raise,” he said. “So it helps internally to understand where you are in real time.”

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In a market characterized by a higher proportion of credit versus equity investments, the need for a comprehensive risk assessment is more important than ever, says Hoban. However, traditional financial analysis falls short in the cannabis industry, with around 40-50% of due diligence being missed, he claims.

To address this issue, Hoban, along with Giada de Carcieriearlier from New limit datesAnd Dotun MalikFounded Citrus C Confidence — the first and only credit rating system that manages and assesses risk for lenders in the cannabis industry.

Explaining the need for such a system, Hoban said: “They are missing a lot of relevant facts, what they call components, market trends, consumer behavior, local government trends, federal government trends. They completely ignore how companies are positioned in the global cannabis supply chain.”

Citrus C Trust aims to provide a more comprehensive picture of the risks for both borrowers and lenders in the cannabis space.

Hoban believes their system can address many of the shortcomings of traditional due diligence, particularly in relation to the unique aspects of the cannabis industry. This is especially important because, as Hoban pointed out, “You don’t see a lot of lawsuits and defaults like you do in other industries because the lenders…