Small business owners of cannabis will soon have access to a $5 million loan program from the New Mexico Finance Commission following approval by an interim legislative committee last week, and applicants whose communities have been disproportionately affected by the ban or who are from rural areas will receive the first cracks in the cash amount.
But some business owners and community regulators say there is still work to be done regarding social and economic equality in the growing industry. Additionally, the first loans won’t be issued until March, just a month before recreational sales begin, hampering businesses trying to get into the ground floor.
Proposed efforts to further promote equality include funding for legal and technical assistance to help new owners apply for licenses and education programs for workers. The upcoming legislative session may represent an opportunity to address these initiatives, and there appears to be a clear need to do so.
The majority of respondents to a survey by the Cannabis Regulatory Advisory Committee said a lack of access to capital is the biggest barrier to entry into the industry, along with the difficult licensing process and regulations that are difficult to navigate.
Business owners who spoke with SFR agree.
“If you don’t give these interests — who enter the market and do not have the experience or resources to compete — financial assistance, grants, loans, education, some kind of infrastructure and support, they are more likely to fail than not,” says Duke Rodriguez, president and CEO of the prominent cannabis company Ultra Health. .
After a failed bid in October, the New Mexico Financial Commission’s Oversight Commission approved the small business loan program last Tuesday.
Individual loans for start-up costs are set at a maximum of $250,000 with an average forecast of $100,000, and the term will be limited to five years. All licensed small businesses – those that do not grow more than 2,000 mature plants – will be eligible but if demand exceeds available funds, priority will be given to companies that meet criteria yet to be determined for those who qualify for equity assistance programs. The state’s Department of Regulation and Licensing has until January 1 to determine those criteria.
The program recognizes that while licensing a small business is less expensive — with annual fees ranging from $1,000 to $2,500 compared to $7,500 for large, vertically integrated businesses — operating costs remain onerous.
Jonathan Leduc is a Floater in the Fruit of the Earth Organics in Santa Fe who plans to open the first dispensary in Los Alamos, called Wade. He believes that local investors will be a faster way to fund, rather than waiting to apply to the program.
“If we had a million dollars, we might already have our full application and licensing but we’re a small business, so we don’t have anywhere near that kind of funding,” LeDuc tells SFR.
Weeed applied for a production license and received provisional approval pending a lease for the site. LeDuc would likely have applied for a loan through the NMFA program if not for the relatively slow introduction. Applications are expected to open by February 1, with the first loans coming out in March. Recreational cannabis sales are scheduled to begin April 1.
“The time frame for all of this is getting really, really tough and really tight,” Leduc says. The schedule for the program “looks a long way from what we’re looking at, especially if they expect people to have plants by April 1st.”
The NMFA is working with the cannabis control division to “implement this program as quickly as possible” and needs to develop the application, loan documentation and monitoring protocol before it is ready for launch, the agency’s CEO Marquita Russel told SFR.
LeDuc and his associates have backgrounds in small business, banking, and real estate, and for several years have tried unsuccessfully to obtain a license to produce medical cannabis. He says he was more prepared than others, so he was giving guidance to potential business owners.
Leduc says that many found the license application process daunting and weren’t educated about what exactly a small business is. Some even thought that they would be able to run their business outside their homes. (They can’t.)
The Cannabis Regulatory Advisory Committee heard a similar story at its meeting last week.
The committee appointed Antonette Telles Humble, the former state director for the National Drug Policy Alliance, to guide conversations about equity with community organizers and others.
Tellez-Humble reports that participants believe the state should allocate funding — possibly tax revenue from cannabis sales — to programs like culturally competent technical assistance and job training, in part as a way to repair the myriad damages in the drug war.
“Seeing how they can make that leap from ostracism and stigmatization because of the war on drugs and trying to create space in the industry now seems overwhelming in some cases,” said Teles Humble. “The bottom line is that if there is no money, how will this happen? So there is still wonder, if not concern, that this will be an unfunded effort.”