New York is looking at other states for guidance on its own recreational marijuana regulations. Some states have struggled to provide enough loans, grants, and start-up funds for small business owners, especially minority business owners, to enter the weed industry before those with more capital and connections take over.
Modeling its process after states like Illinois, New York is looking to work with private lenders to create funds to help entrepreneurs get money in the early stages. In January, Governor Hochul announced a $200 million fund created with money from the state and private parties intended to provide start-up assistance for social equity applicants.
The plan describes using $50 million in state money, funding from private investors, and services provided by the state Dormitory Authority to help eligible businesses find, design, and build locations as well as renovate their spaces and negotiate leases. The state funds will come from licensing fees and tax revenue.
Applicants eligible for social equity status include individuals disproportionately harmed by the enforcement of cannabis prohibition, minority- or women-owned businesses, distressed farmers, and service-disabled veterans. New York plans to award 50% of all licenses to these equity applicants. The state will provide the first retail licenses to individuals previously convicted of marijuana-related crimes or their families.
New York has stated that one of its priorities is to diversify the state’s weed industry, and according to Hochul, the $200 million fund will help New York achieve that goal. Other states saw the start-up costs of cannabis retail dispensaries rise incredibly high, pushing out underground minority-owned small businesses for large (mostly white) companies with more capital.
Advocates hope the state's measures will truly diversify the weed business, but there is still the question of how the state will ensure that eligible entrepreneurs can get money in the early stages, allowing them to open quickly enough to compete with big corporations looking to get in on the profits.
One major concern is the number of private parties that will contribute to the fund and when they will do so. So far, it is unclear who is contributing and when the funds will be secured and given. The plans say that the money is going to retail and retail build-out first, which brings on the second concern: the costs of seeking a license. If the opportunity to apply for services and funding is only available after the point of applying for a license, then the impact could be limited. Some entrepreneurs who are privileged enough to tap into personal funds or have a network that can fund them may not be as concerned. Many eligible entrepreneurs who do not have that support system, however, are worried about their ability to get a loan for applications, business plans, and start-up costs before the funds from the $200 million plan are available.
Another growing concern is the accessibility of other loans if the rollout of the state's funding plan arrives after most of the first licenses are awarded. Individuals likely to need loans may face obstacles at banks due to weed still being federally illegal, and this also makes them ineligible for federal Small Business Administration loans. This problem means the timing of this seed funding will be critical.
Lastly, many entrepreneurs are worried about the state funding source. If the funding is coming from licensing fees and taxes, money may not be available to applicants until the market is already up and running.
The governor’s office, lawmakers, and the Office of Cannabis Management are still mediating the proposed fund. The Office of Cannabis Management is working diligently to ensure the fund and other measures will give equity businesses a fair start in the industry. Lawmakers are looking at costs from other states, and the OCM has stated they are working to make the licensures for retail sales low to avoid the roadblocks entrepreneurs have encountered in other states.
2022 has seen more measures and proposals created for retail cannabis sales, growing, and farming, and with the board in place we can hope to see even more, including specific details on how the $200M fund will support equity businesses. See updates on these measures on our page, the Office of Cannabis Management website, and the governor’s news site.