Blumenauer Fights Back As Cannabis Industry Loses SBA Loans

Oregon’s Congressman Earl Blumenauer is pushing back against a recent guidance written by the Small Business Administration regarding SBA loans. The document called “Revised Guidance on Credit Elsewhere and Other Provisions in SOP 50 10 5(J)” prevents the SBA from supporting loans to small businesses associated with the cannabis industry.

Rep Blumenauer sent a letter last week to the SBA’s administrator Linda McMahon stating that the new guidance would mean that ancillary businesses that work with companies that get any revenue from cannabis companies would be at a disadvantage. Particularly in states where marijuana is legal, the industry is growing at a fast clip. In Oregon, Blumenauer’s home state, it is a market worth nearly $800 million.

The new SBA guidance could hurt architecture firms, accountants, garden supply businesses and even construction companies. Blumenauer asked whether one order from a cannabis business for soil could hurt a garden center from getting a loan? He asked for a repeal of the guidance.

The Back Story

The new administrative policy was initiated on April 3rd. In it, the new operating procedures state that 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.

Examples of these businesses include testing services, grow light companies, hydroponic equipment companies, and accessory businesses that sell products like pipes or vapes.

Opportunities

It’s not clear how many companies actually planned on trying to get an SBA loan. There are several companies that are happy to serve the industry since banks and now the SBA will be off limits for lending. Mentor Capital in California takes ownership stakes for companies it lends money to. A New Mexico based company called Platinum Finance specializes in marijuana business loans as long as the company meets certain criteria.

There are numerous private lenders and investors interested in loaning dispensaries money, so the SBA issue may not be such a big issue.

Still, the conflicts within the government concerning cannabis continue and are highlighted by the SBA’s move. As a bipartisan bill on hemp moves quickly through the legislative process, the DEA and the SBA are fighting back to continue to alienate the cannabis industry.

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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