Federal Bills Would Allow Cannabis Industry to Access Small Business Administration Programs
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Federal Bills Would Allow Cannabis Industry to Access Small Business Administration Programs

New legislation in Congress would extend several SBA initiatives to small businesses in the cannabis sector.

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July 2, 2019

Federal lawmakers have introduced legislation that would allow small businesses in the cannabis industry to access Small Business Administration (SBA) programs, as well as remove cannabis from the Controlled Substances Act (CSA).

Following a House Committee on Small Business hearing June 19 that explored ways to help small cannabis business, Small Business Committee Chairwoman Nydia M. Velázquez (D-NY), Rep. Jared Golden (D-ME) and Rep. Dwight Evans (D-PA) announced legislation June 28 that would extend several SBA initiatives to the cannabis industry.

“State cannabis programs are successfully replacing criminal enterprises with tightly-regulated, responsible businesses, but it’s increasingly difficult for smaller firms to compete in the legal industry without access to the essential Small Business Administration programs that other industries take for granted,” said National Cannabis Industry Association (NCIA) Executive Director Aaron Smith in a public statement. “By improving access to capital, this legislation will also help level the playing field for entrepreneurs from communities of color and others disproportionately impacted by the failed policies of prohibition seeking to enter the legal cannabis industry.”

H.R. 3540, the Ensuring Safe Capital Access for All Small Businesses Act of 2019, would make cannabis businesses eligible for SBA-backed loans, including the 7(a) loan guaranty program, disaster assistance, the Microloan program and the 504 loan program. Many of these programs are meant for borrowers who have difficulty obtaining credit from conventional loans, according to a press release, and so the legislation aims to help entrepreneurs from communities of color and other underserved areas that have been disproportionately harmed by the war on drugs.

“As our society continues to move the needle on this issue, we must recognize that legal cannabis businesses are often small businesses that fuel local economies and create new jobs,” Velázquez said in a public statement. “That is why I am pleased to introduce legislation to extend affordable lending options to small businesses that operate in the cannabis space, while simultaneously recognizing the structural disadvantages facing entrepreneurs from communities of color.”

In addition, Golden, the chairman of the Subcommittee on Contracting and Infrastructure, has introduced H.R. 3543, the Ensuring Access to Counseling and Training Programs for All Small Business Act of 2019, to prohibit SBA resource partners—including the Small Business Development Centers, Women’s Business Centers, SCORE and Veterans Business Outreach Centers—from declining services to a business solely because it is cannabis-related.

“Starting a small business is never easy, so we need to ensure entrepreneurs have access to the resources necessary to succeed, no matter the industry,” Golden said in a public statement. “Continuing to turn some Maine small business owners away from crucial SBA programs and resources holds our economy back and keeps those businesses from creating jobs. My bill would address this problem by helping small business owners directly or indirectly associated with the cannabis industry get their small businesses off the ground and grow.”

Evans, the vice chair of the Small Business Committee, introduced H.R. 3544, the Homegrown Act of 2019, to establish an SBA grant program that would provide state and local governments with funding to aid small businesses in cannabis licensing and employment, with a focus on communities most impacted by the war on drugs.

“My bill would act as a poverty-buster and help homegrown small businesses, which are the backbone of our economy,” Evans said in a public statement. “We need to make sure that the booming legal cannabis industry does not become consolidated in the hands of a few big companies. My bill would help small businesses to participate in this industry and knock down barriers to jobs and entrepreneurship for people most adversely impacted by the war on cannabis, which has been especially harsh for people of color.”

H.R. 3540 and H.R. 3544 would also decriminalize cannabis at the federal level by removing it from the CSA.

“Chairwoman Velázquez is now the first committee chair ever to introduce legislation that would end the federal marijuana prohibition,” said NORML Political Director Justin Strekal in a public statement. “As this nascent industry begins to grow, federal policy should strive to reduce roadblocks for those qualified entrepreneurs who have historically been the targets under the criminalization of cannabis. Enterprising individuals who would benefit most from the critical resources that the Small Business Administration provides must not be discriminated against as a matter of fairness and opportunity.”

This trio of bills was introduced following a Committee on Small Business hearing, where industry stakeholders testified on ways the SBA could aid small business owners in the cannabis industry.

“The first point of this hearing was to have a few different perspectives of the cannabis industry represented so that these lawmakers could ask questions, specifically around how the Small Business Administration can be helpful to small businesses,” the Minority Cannabis Business Association’s (MCBA) board of directors president, Shanita Penny, told Cannabis Business Times after the hearing, where Penny testified on how to give small, minority-owned businesses a fair shot in the cannabis market. “They’re looking at this as an opportunity to carve out a lane for small businesses as large cannabis businesses are literally every single week coming together and consolidating and creating some giants.”

The introduction of this legislation is exactly what Penny had hoped for after the hearing. “The ability to now introduce legislation [that] really impacts what’s happening in the industry at the federal level is exactly the kind of momentum we need to see to get to full legalization, the end of federal prohibition."