Committee on Small Business heard from experts about the need for access to loans and financial services available to other industries
WASHINGTON, D.C. – The House Committee on Small Business held a hearing today entitled “Unlocked Potential? Small Businesses in the Cannabis Industry” to explore the opportunities for small businesses and entrepreneurs in legal cannabis markets, as well as the obstacles those businesses face when entering or operating in the emerging industry.
“As more and more states take steps to bring cannabis to commerce, we are seeing small businesses at the forefront of this expanding industry,” said Rep. Nydia M. Velazquez (D-NY), chairwoman of the House Committee on Small Business. “As the only House Committee dedicated solely to the needs of small firms, it is important for us to be shedding light on the challenges these small entities face as well as the economic potential they offer… Despite growing economic opportunities around legal cannabis, factors like federal law enforcement, conflicting rules among the states, and our current banking regulations are hindering the ability for entrepreneurs and small businesses to fully engage in this new industry.”
The vast majority of financial institutions are unable to provide services to the cannabis industry, its employees, and ancillary businesses due to burdensome federal restrictions and fear of potential prosecution. The SAFE Banking Act, which would provide safe harbor for banks and other members of the financial sector to provide services including small business loans, was approved by the House Financial Services Committee in March. A full vote in the House is anticipated in the coming weeks.
“As a bank, we see the potential in this industry, as well as the challenges financial institutions face when working with cannabis businesses,” said Dana Chaves, director of specialty banking at First Federal Bank and chair of the National Cannabis Industry Association’s Banking Access Committee, who testified at the hearing. “Unfortunately, current federal policies not only create public safety and transparency issues – they also disproportionately harm small businesses. We are doing what we can and shouldering tremendous risk to help the cannabis industry, but we want to be able to provide a full range of financial services so that these small businesses can thrive in a safe environment, and we cannot do so without clear guidance from Congress.”
Cannabis businesses and the ancillary businesses that serve them are also ineligible for Small Business Administration (SBA) loans, but legislative avenues to address this and give priority status to businesses owned by women and people of color are being explored by lawmakers and stakeholders.
“Small businesses have been the backbone of the cannabis industry, but we need to make sure they can stay viable as laws change and the industry matures,” said Aaron Smith, executive director of the National Cannabis Industry Association (NCIA). “Unfortunately, our federal laws are hurting small businesses and marginalized communities the most. We look forward to continuing our work with Congress to address this disparity and ensure that the people who have been most harmed by prohibition can benefit proportionately from the opportunities created by legal cannabis markets.”
There are currently 47 states that allow cannabis in some form. Thirty-three states and several territories have effective medical cannabis laws, and 10 states as well as the District of Columbia and the territories of Guam and CNMI have made cannabis legal for adults. In May, the Illinois state legislature approved a measure regulating the adult cannabis market, which the governor has pledged to sign. It will be the 11th state to make cannabis legal and the first to regulate the substance through its legislature.