New Mexico marijuana microbusinesses could have new options to launch their operations under a plan that would provide public financing for craft cannabis growers in the state’s newly approved recreational marijuana industry. Under a plan suggested by the New Mexico Finance Authority earlier this month, authorities would establish a $5 million line of credit and offer loans of up to $250,000 to newly licensed craft cannabis growers in the state.
In April of this year, New Mexico lawmakers passed the Cannabis Regulation Act (CRA) to legalize marijuana for use by adults and establish a regulated cannabis economy. The law, which went into effect in June, allows adults 21 and older to posses up to two ounces of cannabis and up to 16 grams of marijuana concentrates. Home cultivation of up to six mature cannabis plants is also permitted. The legislation also created the state Cannabis Control Division, which is required to begin issuing licenses to qualified commercial cannabis companies by January 1, 2022, with regulated retail sales scheduled to begin on April 1 of next year.
The CRA also established a microbusiness license class for small craft cannabis growers cultivating up to 200 plants in a single location. Additionally, the legislation requires the state to establish programs that support business opportunities for members of communities disproportionately harmed by the War on Drugs, as well as provide help for farmers and residents of rural and economically disadvantaged communities. So far, state regulators have received at least 22 applications for licenses to form cannabis microbusinesses, according to public records.
Legislative Committee Considers Plan
Under the plan unveiled at a meeting of the New Mexico Finance Authority Legislative Oversight Committee on October 14, loans for cannabis microbusinesses would be underwritten by the state’s Economic Development Revolving Loan Fund, which supports economic development in remote areas of New Mexico. Funds for the program would be drawn from idle loan reserves including money allocated for critical services during the coronavirus pandemic that has not been spent.
Only newly licensed microbusinesses would be eligible for the loans under the proposal. Established medical marijuana businesses in the state would not be eligible. New Mexico Finance Authority CEO Marquita Russel, who has drafted preliminary rules for the proposed loan program, told lawmakers on the committee that traditional business loans are widely unavailable to small companies in the legal cannabis industry.
“They have very few options. If you are a startup cannabis microbusiness, you can’t go to a bank, you can’t go to the Small Business Administration,” Russell said. “There is not a space for a small business to get a loan of this sort.”
Russel acknowledged that there will be challenges to administer the loan program for newly licensed cultivators, noting that many of those eligible for support will be making a transition from the illicit marijuana economy.
“We anticipate that most of them will not have current financial statements,” she said.
To mitigate the risk of making loans to unproven New Mexico marijuana microbusinesses, applications for the program would require guarantees of repayment with collateral including land or equipment. Those who qualify for the loans would be required to pay them back within five years.
“We will be fully secured. These are our dollars, they need to be repaid,” Russel said. “These aren’t (loans) for people who just kind of decided this might be fun.”
State Regulation and Licensing Department Linda Trujillo superintendent, who oversees the Cannabis Control Division, told the committee that providing support to craft cannabis growers is essential to creating an equitable regulated marijuana economy in new Mexico.
“If we don’t find a way to help these microbusinesses to enter into the market, then ultimately they will be shut out,” Trujillo said during the committee hearing.
Lawmakers Hesitant About Loan Program
Members of the finance authority oversight committee expressed reservations about the loan program for New Mexico marijuana microbusinesses, noting concerns about how applications would be vetted and approved. Lawmakers also wondered if the loans would go to those who need them the most.
“There are still so many questions in here, where questions can’t be answered,” said Republican state Sen. Stuart Ingle. “We may need to slow things down.”
Democratic Sen. Joe Cervantes pointed out that the cover sheet for the loan proposal presented at the hearing included text indicating the committee approved the plan even though a vote had not yet been taken. He characterized the manner in which the proposal was advanced as “bypassing the legislative process.”
“This feels like this is a take-it-or-leave-it situation,” Cervantes said. “It sounds like we have to approve this now.”
The committee did not take that step however, voting 6 to 5 against the loan program plan. Democratic Rep. Liz Thomson, the committee chair, suggested that Russell and Trujillo address the committee’s concerns and return in November so that lawmakers could reconsider the proposal.