StaffApril 17, 2023
The struggles persist despite record sales in the state.
loans Archives - Green Market Report
StaffApril 17, 2023
Kaitlin DomangueJanuary 27, 2020
Sunniva (OTCMKTS: SNNVF), a Canadian cannabis company announced the closing of wholly-owned subsidiary Full-Scale Distributors, LLC set to take place in February 2020.
“The closing of FSD is a necessary step that will eliminate the cash outlay required to operate that business,” said Dr. Anthony Holler, Chairman & CEO of Sunniva Inc. “We continue to focus on the preservation of our available funds to allow us to actively defend Sunniva’s rights under the previously disclosed dispute related to the Build to Suit Lease of the Cathedral City Glasshouse.”
Cannabis companies that are strapped for cash not have the option of filing for bankruptcy. According to bankrupt stock expert, Rick Szambel, “Currently under U.S. Bankruptcy Law companies that are engaged in a business or product not legal under Federal Law may not use the U.S. Bankruptcy Code for protection in reorganizing their debt or centralize their assets for sale. Federal Law considers marijuana an illegal substance and U.S. Trustee who is part of the Department of Justice has aggressively blocked companies in the marijuana industry, employees, and even landlords from filing Chapter 7 or 11, often forcing companies to wind down at a state level.”
This is not the first time the company has been in hot water. Last year, the company and one of its subsidiaries were named in a lawsuit for failure to repay a loan. Green Market Report previously reported “Sunniva, through its subsidiary 116, entered into a $3.4 million mortgage to finance the purchase of land for the greenhouse facility in Okanagan Falls, British Columbia,” according to the company’s November financial statement. Also included in the statement was the acknowledgment the company had paid $400,000 of their loan as of September 30th, 2019 but they were in default on the remaining balance. The company’s stock also fell significantly in November following the resignation of its CFO and president.
Debra BorchardtMay 7, 2018
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.
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