SANTA FE, N.M. — Small-scale marijuana businesses in New Mexico would receive access to publicly financed loans of up to $250,000 in an effort to promote social and economic fairness, under a proposal unveiled Thursday.
The New Mexico Finance Authority suggested a $5 million line of credit to licensed cannabis “microbusinesses,” seeking preliminary approval from a panel of state legislators. The panel voted 6-5 against immediate endorsement, stalling the effort amid a variety of concerns about rules for lending to the fledgling recreational pot industry.
Under the proposed lending rules, loans would be made available to qualified cannabis businesses that are licensed to cultivate and sell marijuana from up to 200 plants at a single location, operating much like a craft winery or brewery. That business niche was authorized in sweeping legislation to regulate and tax recreational marijuana sales, signed by Democratic Gov. Michelle Lujan Grisham in April.
The law requires that the state promote business opportunities for communities that were penalized disproportionately by past criminal enforcement of marijuana laws, without saying exactly how. The social-justice provisions also mandate some form of help for farmers from economically disadvantaged communities and residents of rural areas where the marijuana industry may take hold.
New Mexico Finance Authority CEO Marquita Russel, an architect of preliminary rules for the loan program, said traditional business loans are still scarce for small-scale cannabis entrepreneurs.
“They have very few options. If you are a startup cannabis microbusiness, you can’t go to a bank, you can’t go to the Small Business Administration,” she told legislators. “There is not a space for a small business to get a loan of this sort.”
The proposed loan program would be underwritten by the state’s Economic Development Revolving Loan Fund, which helps stimulate the economy in remote regions of the state. Russel says the program would draw on idle loan reserves, including unspent money set aside for critical services during the coronavirus pandemic.
State cannabis and finance regulators acknowledged that challenges likely lie ahead in vetting small loan applications from unproven business in a startup industry emerging partly from the black market.
“We anticipate that most of them will not have current financial statements,” Russel said.
Experienced medical marijuana companies would not qualify under proposed lending rules aimed at helping small, newly licensed growers.
Republican state Sen. Stuart Ingle of Portales warned that it may be difficult to fully recover loans from marijuana farmers and highlighted a lack of farming and ranching experience among board members at the New Mexico Finance Authority.
“There are still so many questions in here, where questions can’t be answered,” he said. “We may need to slow things down.”
State-sanctioned recreational cannabis sales are scheduled to start no later than April 1. State cannabis regulators have received at least 22 license applications to form cannabis microbusiness, according to public records.
For the loan program to move forward, approval is needed from a legislative oversight committee and the New Mexico Finance Authority board that includes several state cabinet secretaries and representatives of municipal and county governments.
Loan applications would require collateral guarantees of repayment such as land or equipment, with loan periods of up to five years.
“We will be fully secured. These are our dollars, they need to be repaid,” Russel said. “These aren’t (loans) for people who just kind of decided this might be fun.”