With a deadline to open for business this spring, minority-owned marijuana entrepreneurs will have a pool of $8.75 million in state-backed loans, state officials said Thursday. State.
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 businesses eligible to receive up to $500,000 interest free for 18 months.
“This is great news, but I’ll wait to see the implementation,” said Lisbeth Vargas Jaimes, executive director of the Illinois Independent Craft Growers Association. “Everything with this process took so long.”
The 35 businesses that were awaiting news of their loan applications under a previous loan program — which offered below-market interest rates from banks — will be eligible for the social cannabis loan program. Loan funds used for a range of key expenses, such as rent, payroll, utility bills and other costs will not have to be repaid, said Emily Bolton, spokeswoman for the Department of trade.
The announcement comes less than a week after Vargas and others future minority pot entrepreneurs told the audience of a City Club lunch that up to eight in 10 social equity licensees would likely miss a March deadline to get their business up and running. Entrepreneurs who have not obtained all necessary permits, found a permanent location, ordered inventory and purchased equipment and other signs of viability by March risk losing their license. Start-up costs for a cottage-growing operation can exceed $2 million, Vargas said.
Illinois’ Social Equity Licensing Program, intended to direct opportunities in the burgeoning legal cannabis industry to minority business owners whose communities are suffering the most from the toll of the war on illegal drugs , largely stalled for years as the state struggled to hold a lottery for social equity licenses, then faced lawsuits after the winners were selected. The years-long delays have eaten away at the start-up funds of many entrepreneurs and scared off investors, Vargas said.
Because marijuana is still federally illegal, pot entrepreneurs have a hard time recruiting investors and accessing bank loans. Many social equity licensees are first-time business owners and most have little money for investment capital, Vargas said. The initial state loan program offered interest rates of around 8%, but commercial banks were offering rates closer to 20%, Vargas said.
Under the loan program, licensees wishing to initiate artisanal farming activities are eligible for loans of up to $500,000. Licensees in the infuser business — who process cannabis concentrates or cannabis-containing items — can get up to $250,000, and licensees looking to work as transporters of cannabis products can get up to $50,000.
The $8.75 million in the current loan pool should cover the maximum loans for each of the 37 current applicants, who will still be eligible for additional loans from banks working with the state, Bolton said. The state will offer a second round of loans to social equity licensees who intend to open cannabis dispensaries, Bolton said.