New York City cannabis fund to dole out millions in loans to social equity companies

A New York City-specific fund for financially troubled marijuana companies is slated to begin awarding loans to businesses as soon as this summer.

The Cannabis NYC Loan Fund, which is flush with $2.4 million in city money, plans to award loans of $50,000 to $100,000 with interest rates capped at 9.5% to as many as 40 entrepreneurs who also hold permits for conditional adult use retail dispensaries (CAURD), NY Cannabis Insider reported. The fund also plans to give out a second round to a broader pool of businesses. Applications for loans should be available by the end of the summer from the fund.

The CAURD group is a specific round of 463 licenses awarded last year by the state Office of Cannabis Management.

Once that initial pool of cash is exhausted, the fund will be replenished with $7 million from state coffers for a “second phase” of small business loans with a 0% interest rate in order to attract private investors to contribute to New York City’s cannabis fund, according to NY Cannabis Insider. The city envisions the fund growing to as much as $39 million as a public-private partnership.

Loans from the second phase will also be available to a wider array of entrepreneurs than just the CAURD shops; “all license types” will be eligible for loans of up to $500,000 at interest rates of 11.5% to 13.5%, which NY Cannabis Insider noted is “slightly above” the prime rate “but below typical private loans to cannabis companies.”

All fund loan recipients are limited to businesses operating within the five boroughs of New York City.

The city’s Economic Development Center and Department of Small Business selected cannabis industry financier Tuatara Capital to oversee the disbursement of funds to qualified social equity companies, according to NY Cannabis Insider.

Tuatara will be paid a management fee and is also responsible for recruiting private investors to help shore up the fund, a move that could be somewhat risky, given that the Dormitory Authority of the State of New York had reportedly very little luck convincing investors to contribute to a similar state-run fund for social equity companies.

DASNY ultimately struck a deal with Chicago Atlantic to provide an added $150 million to the state fund of $50 million, but reporting by THE CITY found that the terms amounted to a “sweetheart deal” for Chicago Atlantic. The program had an original goal of supporting the build-out of 150 social equity dispensaries through a loan program, but THE CITY found that the DASNY program has thus far opened only 16 shops.

That’s where the upcoming New York City fund comes in, to help fill a financing void for small businesses.

“The commitment here has been to make sure that the fund is nonpredatory and is really focused on the needs of the entrepreneur,” Cannabis NYC Executive Director Dasheeda Dawson told NY Cannabis Insider. “It’s the first effort we’ve made to provide entrepreneurs with access to affordable financing in an environment that typically lacks access for cannabis entrepreneurs.”

Jayson Tantalo, vice president at the New York Cannabis Retail Association, hailed the new fund as a “tremendous step in the right direction.”

“Any below-market rate, low-interest rate loans will be much more substantial than the DASNY fund that was offered in the beginning,” Tantalo told NY Cannabis Insider.

The post New York City cannabis fund to dole out millions in loans to social equity companies appeared first on Green Market Report.

via http://www.KahliBuds.com