Canada’s COVID-19 olive branch for cannabis sector comes with caveat

The Business Development Bank of Canada (BDC) has made the country’s cannabis industry eligible for COVID-19 emergency funding, an about-face that might provide financial relief to some established Canadian marijuana businesses with access to financial institutions.

Cannabis businesses were previously excluded from the COVID-19 lending offered by the BDC, a federally owned and operated entrepreneurial bank, sparking appeals for help from the regulated marijuana industry.

Because of the vast economic impact of the COVID-19 pandemic, the BDC now says cannabis businesses have been included in the expanded scope of eligibility.

Those programs are:

  • The Canada Emergency Business Account.
  • The Small and Medium-sized Enterprise (SME) Loan and Guarantee program.

The Canada Emergency Business Account program offers loans of up to CA$40,000 ($28,348) to small businesses to cover operating costs. Those loans are interest-free for the first year.

The SME Loan and Guarantee program lets eligible companies obtain up to 6.25 million Canadian dollars ($4.5 million) in incremental credit amounts; 80% would be provided by the BDC and the remainder by a financial institution.

Those loans have a 10-year repayment period at commercial interest rates, according to BDC.

Bank access

Both programs are delivered through financial institutions, including banks and credit unions.

But access to a financial institution could pose a problem for many marijuana businesses, said Patrick Moher, a partner at Canadian cannabis public relations agency Alan Aldous Communications, which launched a campaign calling on BDC to extend its emergency programs to the cannabis sector.

Entrepreneurs have long said a lack of banking access has stymied legal marijuana businesses.

“In order to be eligible, businesses must have been impacted directly or indirectly by recent events and have been financially viable prior to the impact from COVID-19,” the BDC said of the Small and Medium-sized Enterprise Loan and Guarantee program.

Open to interpretation

That eligibility requirement appears to leave room for interpretation, said Dan Sutton, CEO of British Columbia cannabis cultivator Tantalus Labs.

“When I see ‘directly or indirectly impacted by COVID-19,’ I think a direct impact would imply that your operators, your workers, your storefronts have been quarantined or closed, and therefore you can’t access revenue,” he said.

“Whereas, an indirect impact would be, you had a bunch of financing or lending lined up that then fell apart because of the massive market selloff a few weeks ago.”

Sutton said Tantalus is seeking clarification on BDC’s eligibility requirements.

“I think we need to learn more before we know that we’re leaning into this whole hog,” he said, “but it certainly seems like a great option, and I think for the broader cannabis industry and the broader Canadian economy it’s a huge step forward.”

Solomon Israel is a reporter for Marijuana Business Daily, based in Winnipeg. He can be reached at [email protected]

For more of Marijuana Business Daily’s ongoing coverage of the coronavirus pandemic and its effects on the cannabis industry, click here.

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