On March 23, the federal Small Business Administration (SBA) stated that cannabis businesses will not be eligible for loans under its Economic Injury Disaster Loan (EIDL) Program, despite expanding the program in response to COVID-19 (Coronavirus). However, the SBA noted that businesses that produce or sell hemp and hemp-derived products may apply for such loans.
An EIDL can provide low-interest financial assistance to a business that suffers substantial economic harm as a result of a federally-declared disaster. In the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Congress included provisions allowing the SBA to provide EIDLs to businesses affected by the Coronavirus, and President Trump announced that he authorized the SBA to offer an additional $50 billion of such loans.
As a testament to the fast-paced environment in which businesses and government find themselves in the wake of the Coronavirus, the “announcement” came in the form of tweets from the SBA’s Pacific Northwest division:
With the exception of businesses that produce or sell hemp and hemp-derived products (Agriculture Improvement Act of 2018, Public Law 115-334), marijuana-related businesses are not eligible for SBA-funded services (OMB, 2 C.F.R. § 200.300).
— SBA Pacific NW (@SBAPacificNW) March 23, 2020
When asked to provide their reasoning, the SBA pointed to the federal prohibition on marijuana:
Sure. It says “to ensure that federal funding is expended and associated programs are implemented in full accordance with U.S. statutory and public policy requirements.” In short, it's because marijuana is not federally legal & SBA is a federal agency. (1/2)
— SBA Pacific NW (@SBAPacificNW) March 24, 2020
Given the federal government’s stance on marijuana, this policy seems unlikely to change. However, additional developments or a more formal announcement from the SBA could shed light on more nuanced situations (for example, a parent company that does not “touch the plant” or an entity that produces both cannabis and hemp products). We will continue to keep apprised of any developments from the SBA. Stay tuned…
Every business and individual has been or will be impacted by the 2019 novel Coronavirus that causes the disease known as COVID-19. The legal questions and concerns raised by this ongoing, widespread and unpredictable crisis are changing day to day. Fox attorneys are closely monitoring the legal and regulatory landscape to provide our clients with useful information to assist in their plans. For more information, see Fox Rothschild’s Coronavirus Resource Page.