An interim legislative committee on Tuesday approved a state-run loan program for small cannabis businesses. The decision was approved by the New Mexico Financial Authority oversight committee with a 9-2 vote.
The program will be supervised by the state financial authority and will be financed by the Revolving Fund for Economic Development. According to a presentation by the authority’s CEO, Marquita Russell, there will be around $ 5 million of the revolving fund made available to qualifying companies. Each loan, Russell told lawmakers on Tuesday, would be capped at $ 250,000 and terms would be capped at five years. Applicants for the loan program would need at least one conditional approval for a cannabis microenterprise from the state regulatory and licensing department with a business plan that shows three years of financial projections. Loan seekers are also expected to provide cash, property, or equipment as collateral. Any loan under $ 100,000 or with a term of less than three years will be charged 2% interest and loans over $ 100,000 or with a term of more than three years will be charged 3% interest. interest.
Russell told lawmakers that a state-guaranteed loan would likely benefit under-represented communities in the state.
“We anticipate that a significant portion of licensed cannabis micro-businesses owned by minorities, or located in rural or economically disadvantaged communities, will face disproportionate barriers to accessing finance to participate in the emerging industry.” Russell told the panel.
Part of those hurdles, she said, is that banks typically don’t offer traditional financing for cannabis businesses and many entrepreneurs are starting to find that starting a cannabis business comes at more cost. provided that.
Russell said the NMFA had identified around three dozen candidate microenterprises that would be eligible for a state loan and that the financial authority’s stringent requirements would guarantee a limited number of defaults.
“This has to be a real business,” Russell said. “People have to have a business plan, in which they explain how they are going to produce and sell their products and to whom. “
Tuesday’s meeting was the second time that the NMFA had appealed to the committee. Last month, the same committee voted against the proposal, with many members asking the financial authority to make changes to the proposal. On Tuesday, Russell said some of the suggested changes have been made. But lawmakers were still worried about defaults and companies that might not be able to raise enough collateral to qualify for a loan. Russell said the loan requirements and short-term loan terms will help keep borrowers from defaulting. In terms of making it available to those who need it most, Russell said the NMFA must always protect its investments.
“They have to be secured loans and we have to make sure they are good financial investments,” Russell said.
Russell added that “first and foremost”, the NMFA must be assured that loan seekers
“Knowing what they’re getting into, from a business standpoint, from a cultural standpoint. “
Russell estimated that after legislative approval, the NMFA can finalize the wording of the requests and make them available to contractors by early next year.