The CARES Act And The Cannabis Industry

The economy has been left reeling from much of the U.S. being forced to stay home due to COVID-19, and small businesses are being hit the hardest. The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a stimulus package passed by Congress in March that is intended to assist small business owners during this unprecedented time. And yet, neither cannabis business owners nor ancillary service providers to the industry are eligible to receive assistance from the Small Business Association (SBA) because cannabis remains federally illegal. This, despite the majority of U.S. states having enacted legalization in some form, cannabis businesses being deemed essential in multiple markets, and the industry generating over $1.9 billion in excise and sales taxes in 2019.

What The CARES Act Provides
The CARES Act sets aside $376 billion of financial support and other resources for small business owners and workers struggling to stay afloat during the health crisis caused by the coronavirus. Available options include payroll protection, forgivable loan advances, and debt relief, as well as access to free business counseling services. The White House and congressional Democrats are now working on a new $450 billion relief package for small businesses after the first one ran out of money in two weeks. This $450 billion will include $300 billion to replenish the depleted Paycheck Protection Program, $50 billion for the Small Business Administration’s disaster relief fund, $75 billion for hospitals, and $25 billion for testing.

According to the SBA however, businesses that engage in “illegal activity” at the federal, state, or local level do not qualify for assistance. That means not only are cannabis dispensaries, delivery services, cultivation sites, and manufacturers shut out, but so are ancillary businesses – legal, marketing, accounting, and other services – that work indirectly with the industry. There is one notable exception: anyone who owns or provides goods or services to a hemp business is eligible since hemp was made legal under the 2018 Farm Bill.

But, there is hope, last week, Rep. Blumenauer and nearly three dozen of his colleagues sent a letter to House leadership urging them to make cannabis businesses eligible for SBA programs. Senators Jacky Rosen (D-NV) and Ron Wyden (D-OR) along with eight co-signers sent a similar letter to Senate leadership on Wednesday. They have been joined by cannabis industry advocates, the United Food and Commercial Workers International Union, state officials including Colorado Gov. Jared Polis, and others. The Emergency Cannabis Small Business Health and Safety Act would stop cannabis businesses and those that provide services to them from being excluded from further federal relief funding provided through the Small Business Administration (SBA).

What Cannabis Business Owners Can Do
NCIA is among multiple organizations actively pushing for the cannabis industry’s inclusion in federal COVID-19 aid packages, but what can cannabis and ancillary business owners do in the meantime?

• Apply for federal assistance anyway. Whether the federal government likes it or not, legal cannabis is the fastest growing industry in America. There’s no better way for cannabis business owners to reinforce this by pursuing every resource made available to other small businesses during this time. Submit a complete, honest application proving compliance and a genuine need – even if it is denied, it could go a long way towards supporting efforts that ultimately change the policy regarding federal aid.

• Explore state-level funding options. In states where medical or adult-use cannabis is legal, local jurisdictions set the tone for the legal industry. Small banks, credit unions, and even your local SBA office – which may be more willing to assist cannabis companies and ancillary service providers in their local communities – could, therefore, be viable options for owners seeking financial assistance.

• Stay the course. Legal cannabis’ status as an essential business – and the grassroots efforts it took to get there – could be a boon for the industry on the other side of this health crisis. While legalization efforts are essentially paused in the era of social distancing, the legal industry can still hold elected officials accountable and impact change through online petitions, and via email and phone-calling efforts.