New York City officials have announced they’re seeking lenders to support a marijuana equity fund that will promote participation in the industry by people who’ve been disproportionately impacted by criminalization.
The New York City Economic Development Corporation (NYCEDC) posted a request for proposal (RFP) on Tuesday, soliciting lenders and an administrator for its Cannabis NYC Loan Fund, which will provide low-cost financing to social equity applicants looking to enter the marijuana market.
Officials are aiming to raise $20-30 million for the fund, which was developed in partnership with the NYC Department of Small Business Services (SBS). That includes an initial infusion of $8 million from the city. The total will depend on private lenders’ response to the RFP.
“To create a more equitable economy, we need to make investments that help achieve this important goal for every industry we are growing in the city,” Deputy Mayor for Housing, Economic Development and Workforce Maria Torres-Springer said in a press release. “With the Cannabis NYC Loan Fund, that is exactly what the City of New York is doing, and we are excited to partner with others who want to join us in investing in an equitable cannabis industry that creates jobs, grows businesses, and creates greater prosperity in the process.”
Money from the fund will provide prospective cannabis equity business owners with below-market capital to get their facilities operational within the city.
“NYCEDC will commit up to $8 million of subordinated loan capital at a 0 percent interest rate, with the intention of attracting private capital to leverage fund size and impact, while bringing down overall interest rates for Loan Fund borrowers,” the RFP says. “Loans will be coupled with technical assistance to increase the likelihood of borrower success and to mitigate the risk of default.”
In order to “mitigate risk and support Borrowers’ long-term success,” the program is structured into three milestone-based stages of loans up to $60,000, $175,000 and $500,000.
“As businesses reach certain milestones, they may apply for initial, and then additional, loans of increasing size,” the RFP says. “To access subsequent, larger loans, businesses need to meet certain operation milestones and entrepreneurs have to complete related technical assistance requirements.”
This approach will allow the fund to “protect against losses and allocate more dollars to businesses with a higher chance of success,” it says.
Mayor Eric Adams (D) first announced the launch of the city’s Cannabis NYC initiative, which is meant to promote cannabis industry equity by supporting entrepreneurs most impacted by the drug war, last August.
That involved opening an online application portal so that people who’ve been criminalized over marijuana could be first in line to receive conditional adult-use retailer licenses.
“Thanks to Mayor Adams’s leadership, NYCEDC is introducing an important tool to make the cannabis industry more accessible and equitable through low-cost financing,” NYCEDC President and CEO Andrew Kimball said. “The Cannabis NYC Loan Fund will help cement New York City as a trailblazer in equitable cannabis industry investments.”
“This fund is committed to boosting an emerging industry while also uplifting underrepresented New Yorkers, particularly those unfairly impacted by antiquated cannabis policy,” he said. “We look forward to working alongside our partners in the public and private sector to continue creating a vibrant, inclusive, and globally competitive economy for all New Yorkers.”
NYC Department of Small Business Services Commissioner Kevin Kim said that the new fund “is an important step in making sure that City’s cannabis entrepreneurs have access to the capital they need to thrive, and to cement New York City’s place as the cannabis industry capital of the world.”
“By focusing on those businesses run by social and economic equity applicants, the Loan Fund will not only grow our businesses but address the inequality created by decades of misguided cannabis policy,” Kim said.
The RFP formally opened on Monday, and lenders are invited to respond through September 7. NYCEDC will also be holding an in-person and virtual information session about the fund on August 3.
“I am thrilled to partner with EDC to launch the Cannabis NYC Loan Fund,” Founding Director of Cannabis NYC Dasheeda Dawson said. “Our efforts here address one of the biggest barriers to success facing cannabis entrepreneurs by providing access to much needed financing that has been sorely lacking. I’m also incredibly proud of our city for establishing this Loan Fund in record time, less than a year from the launch of the Cannabis NYC initiative.”
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Meanwhile, New York marijuana regulators said in May that they were working to launch a pilot program to allow cannabis farmers markets. The state Office of Cannabis Management (OCM) said that marijuana farmers markets could help meet consumer demand while allowing growers to finally get products that were grown last year to the legal market. But reports indicate that the plan has stalled, at least for now.
Gov. Kathy Hochul’s (D) administration is also stepping up its push to transition people to the legal market, despite the bottlenecking of getting approved retailer licensees launched so far.
That included launching a public education campaign in April encouraging adults to buy their marijuana from licensed shops to ensure that products are safe and that revenue is used to advance equity and reinvestment goals.
The New York Senate has also formed a committee focused exclusively on marijuana that will be collaborating with regulators as the state’s cannabis market evolves.
Officials did announce in March that they are doubling the number of conditional adult-use marijuana licenses that can be approved, from 150 to 300, after receiving feedback from certain applicants that they would be able to more expeditiously open storefronts without additional support through a state program designed to help eligible entities create physical locations.
The governor also recently introduced legislation to increase enforcement authority to crack down on illicit marijuana retailers as the state struggles to stand up the regulated adult-use market.
In December, Hochul separately unveiled a marijuana business and product verification tool, with plans to post a QR code on licensed cannabis retailers and a universal symbol label for authorized cannabis products.
She also signed a bill in late November aimed at expanding the state’s hemp market by promoting collaborative partnerships to identify more opportunities to utilize the crop and its derivatives for packaging, construction and other purposes.
The New York Senate also approved a bill last month that would provide tax relief to New York City marijuana businesses that are currently blocked from making federal deductions under an Internal Revenue Service (IRS) code known as 280E.
While Hochul signed a budget bill last year that included provisions allow state-level cannabis business tax deductions—a partial remedy to the ongoing federal issue—New York City has its own tax laws that weren’t affected by that change.
Photo courtesy of Mike Latimer.