Cannabis and Coronavirus: Will Businesses Have Access to SBA Relief Loans?

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Coronavirus stimulus bills may leave cannabusinesses unprotected. (Image: Jer123 / Shutterstock.com)

COVID-19 has thrust both simple and complicated questions into view. For the cannabis industry, which has long had to make lemonade out of lemons, many wonder if relief dollars will make it to an industry not accustomed to relying on federal assistance.

Last week, we spoke with attorneys from Duane Morris LLP about how unemployment claims for cannabis workers could play out. We thought it would be good to address whether or not cannabis businesses will have access to federal stimulus money especially considering that the cannabis industry is mostly made up of small operators.

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As we all know, despite some form of cannabis legalization being implemented in the majority of states, the federal government still considers marijuana a Schedule I narcotic under the Controlled Substances Act. Although the message should be quite simple—we are all Americans and will ensure no one is left behind during the coronavirus pandemic—often federal law makes dispensing compassion a challenge.

“Because the cultivation and sale of marijuana is illegal under federal law, marijuana businesses and certain ancillary businesses are not eligible to participate in many of these programs,” Vicente Sederbeg LLP, a law firm that specializes in many areas of law including cannabis said on its website in response to the question about cannabis businesses receiving Small Business Administration (SBA) loans.

“The SBA recently confirmed that marijuana businesses are not able to access the SBA funded programs including the EIDL [Economic Injury Disaster Loans] Program, even though marijuana businesses are as equally harmed by the coronavirus pandemic as other law-abiding, tax-paying small business operators,” the law firm said.  

Unfortunately, even those who do not directly handle cannabis may be in for bad news. Although the SBA has not specifically addressed non-plant touching businesses in regard to the Paycheck Protection Program, for which applications open today, previously stated policies from the administration signal it will not be willing to help many ancillary businesses in the cannabis industry. In 2018, the SBA said non-plant touching businesses were ineligible for federally supported loans because they still profit off of an illicit drug. This even includes businesses that may not solely do business in the cannabis industry such as grow light makers and hydroponic companies.

Cannabis trade associations are currently lobbying lawmakers to address the situation and open up access to stimulus relief for the industry. There also is legislation, specifically H.R. 3540 – Ensuring Safe Capital Access for all Small Business Act of 2019, currently pending in the House. If passed, this bill would remove cannabis as a Schedule I narcotic and force the SBA to grant certain loans to cannabis companies. 

“Cannabis advocates will continue to promote the specific inclusion of the cannabis industry in economic relief legislation at the federal and state level,” the law firm said.

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