Cannabis Industry Braces Itself For Economic Impacts of COVID-19
The global pandemic caused by the rapid spread of COVID-19 has had an effect in almost every business sector. For many industries the future is unclear.
Recently, its’ been a rollercoaster of changes for the marijuana market. Cannabis businesses have seen sudden sales spikes and quick declines as Governor Newsom issued a stay-at-home order for Californians last month.
From manufacturing their own hand sanitizer to help combat the spread of the virus, to opening up drive thru services to help customers with social distancing, marijuana retailers have had to make new changes to adapt to this new normal and survive this crisis.
With most of the world currently at halt, the economy is facing a major catastrophe. The federal government has been working to come up with a stimulus plan to help those affected by the crisis.
Last month, the U.S Senate approved an estimated $2 trillion package to combat the severe impacts that the COVID-19 outbreak has created.
The CARES Act
The “Coronavirus Aid, Relief, and Economic Security Act” or CARES Act, is supposed to provide $500 billion in corporate aid and $349 billion in small business loans so that businesses can continue to pay employees and the economy can be stabilized.
The CARES Act also includes a “Paycheck Protection Program” which provides small business loans for qualifying companies to cover employee salaries, health benefits, mortgage, and utility obligations during the coronavirus outbreak.
Qualifying businesses must have a total of 500 full-time and part-time employees combined and submit a loan application verifying employee rates and proof of expenses that would be covered under the program. But where does the cannabis industry fit in?
Will Cannabis Businesses Be Able to Benefit From These Programs
Lack of government assistance is going to create big hurdles for the cannabis industry during these times.
Although licensed cannabis businesses can operate legally in various states, marijuana is still classified as a Scheduled I substance under the Controlled Substances Act, which makes cannabis businesses ineligible for the Paycheck Protection Program.
It will be very unlikely for cannabis businesses to be able to obtain any federally backed loans due to banking restrictions. Even today, financial institutions are hesitant to work with the cannabis industry in fear of federal repercussions.
Unfairly, cannabis businesses may not be able to benefit from the stimulus package. It all goes back to the same issue the industry has faced from the beginning and something that hopefully will change in the near future.
New legislation such as the MORE Act, which was introduced to the Senate last year, would open up Small Business Administration funding for legal cannabis businesses.
Even though there’s hope in the future, until Congress passes some sort of marijuana reform, there is no federal financial aid for the cannabis industry during the current economic crisis.