WASHINGTON—America's legal cannabis industry has been dealt a new roadblock when it comes to banking.
As providers of state-legal cannabis continue to search for banking institutions willing to handle their cash, a new policy from the federal Small Business Administration (SBA) will make it nearly impossible for any type of marijuana or marijuana-related business to obtain a government-backed loan, Merry Jane reported.
“According to concurrent reports from CNBC and Marijuana Moment, the SBA, which has an annual taxpayer-funded budget of over $700 million to encourage and assist the growth of small businesses, will no longer back any advance given to a company that, directly or indirectly, receives profit from cannabis sales,” Merry Jane said.
Per the new administrative policy, implemented in April, there are three types of cannabis and cannabis-related endeavors that are now locked out from the federal agency's lending services — direct marijuana business, indirect marijuana businesses, and hemp businesses, Merry Jane reported.
The SBA will no longer support loans to "a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to direct marijuana businesses of products or services that could reasonably be determined to support the use, growth, enhancement, or other development of marijuana," the new regulatory guidelines state, Merry Jane reported.
“Examples include businesses that provide testing services, or sell grow lights or hydroponic equipment, to one or more direct marijuana businesses. In addition, businesses that sell smoking devices, pipes, bongs, inhalants, or other products that may be used in connection with marijuana are ineligible if the products are primarily intended or designed for such use or if the business markets the products for such use," the guidelines explain.
Under those guidelines, hardware stores, garden supply centers, construction firms, upstart scissor companies, and many more small businesses could all be at the risk of being denied loans because their products are purchased to help facilitate the cannabis industry. In legal weed states like Colorado and California, the new guidelines throw a wrench into the plans of countless entrepreneurs looking to cash in on the budding market without actually growing their own cannabis, Merry Jane said.