State announces $8.75 million loan fund for social equity cannabis businesses
Businesses awarded ‘social equity’ licenses are eligible for zero-interest, forgivable loans as deadline to open their doors looms.
With a deadline to open their doors this spring, minority marijuana business entrepreneurs will have an $8.75 million pool of state-backed loans, state officials announced Thursday.
The state Department of Commerce and Economic Opportunity will release the funds to more than 30 businesses with “social equity” licenses to grow, sell, process or transport cannabis and related products, with firms eligible for up to $500,000 at zero interest for 18 months.
“This is great news, but I will be waiting to see the implementation,” said Lisbeth Vargas Jaimes, executive director of the Illinois Independent Craft Growers Association. “Everything with this process has taken so long.”
The 35 businesses that were awaiting word on their applications for loans under a previous loan program — which offered below-market interest rates from banks — will be eligible for the Cannabis Social Equity Loan program. Loan funds used for a range of key expenses, such as rent, payroll, utility bills and other costs won’t have to be repaid, said Emily Bolton, spokeswoman for the commerce department.
The announcement comes less than a week after Vargas and other would-be minority pot entrepreneurs told the audience at a City Club luncheon that as many as eight out of 10 social equity license holders would probably miss a March deadline to have their businesses up and running. Entrepreneurs who haven’t secured all necessary permits, found a permanent location, ordered inventory and purchased equipment and other signs of viability by March risk losing their license. The costs of starting a craft growing operation can top $2 million, Vargas said.
Illinois’ social equity license program, intended to steer opportunities in the booming legal cannabis industry to minority business owners whose communities suffer most from the toll of the war on illegal drugs, has been largely stalled for years as the state struggled to hold a lottery for the social equity licenses, then faced lawsuits after winners were picked. The years-long delays ate into the start-up funds for many entrepreneurs and scared off investors, Vargas said.
Because marijuana is still illegal on the federal level, pot entrepreneurs have struggled to recruit investors and access bank loans. Many social equity licensees are first-time business owners, and most have little cash of their own for investment capital, Vargas said. The state’s original loan program offered interest rates at around 8%, but commercial banks were offering rates closer to 20%, Vargas said.
Under the loan program, licensees looking to start craft growing operations are eligible for loans of up to $500,000. Licensees in the infuser business — which deals with cannabis concentrates or items that contain cannabis — can get up to $250,000, and licensees looking to work as transporters of cannabis products can get as much as $50,000.
The $8.75 million in the current loan pool should cover max loans for each of the 37 current applicants, who still will be eligible for additional loans from banks working with the state, Bolton said. The state will offer a second round of loans for social equity license holders who intend to open cannabis dispensaries, Bolton said.