House lawmakers organized a hearing before the Committee on Small Business June 19 to explore ways to ease regulations and help small business owners find success in the legal cannabis industry. Shanita Penny, president of the board of directors for the Minority Cannabis Business Association (MCBA), testified before the committee, sharing her perspective on how to give small, minority-owned businesses a fair shot in the marketplace.
“It was an absolute honor,” Penny tells Cannabis Business Times. “There are a number of things that the Minority Cannabis Business Association focuses on, but … at the forefront are the communities that were impacted by prohibition and the war on drugs.”
The hearing, titled “Unlocked Potential? Small Businesses in the Cannabis Industry,” allowed Penny and other industry stakeholders to discuss the challenges they face in accessing programs from the Small Business Administration (SBA), which is overseen by the House Committee on Small Business.
Here, Penny shares insight into the hearing, the obstacles that small and minority-owned cannabis businesses face, and how those obstacles can be overcome.
Cannabis Business Times: What was the overall goal of the House Committee on Small Business hearing? What did lawmakers hope to accomplish?
Shanita Penny: Our elected officials are really looking to constituents—whether they’re business owners, folks in the community [or] medical doctors—to provide education. All of our elected officials have priorities as legislators, and where we can help them understand how the laws that they’re making impact the evolving cannabis industry, we have to take advantage of that.
The first point of this hearing was to have a few different perspectives of the cannabis industry represented so that these lawmakers could ask questions, specifically around how the Small Business Administration can be helpful to small businesses. They’re looking at this as an opportunity to carve out a lane for small businesses as large cannabis businesses are literally every single week coming together and consolidating and creating some giants. Or, if you’re talking about the social justice piece, you’ve got economic empowerment and social equity programs throughout the country now that need support because these business owners, regardless of the priority that you give them or the potential technical assistance that you’re able to give them, they still need access to capital.
CBT: What specific obstacles do small cannabis businesses—and small minority-owned cannabis businesses—face that many other small businesses in other industries do not?
SP: In general, the industry is still struggling because of a lack of access to things like banking. We’re still dealing with the issues that stem from a lack of access to the normal, ordinary business expenses that you typically can write off. There are these very, very high barriers to entry. There are limited licenses available in most states, so they’re highly competitive. It typically takes high six figures to multi-millions of dollars to get these businesses—to apply for the licenses, to build out the operation, and then finally get to a place where you’re actually generating revenue.
The fact that more people of color have been arrested and convicted of cannabis crimes in this country and that [barring individuals from entering the legal market] in a lot of states was a big hang-up [and] will continue to be a big hang-up. The trauma that comes from living in these communities that were over-policed, where people were snatched out of their home and served significant time in jail and prison for very small cannabis possession charges—the trauma that comes from that and someone not being able to wrap their head around the opportunity that is the cannabis industry today really is the root cause for the lack of diversity that you see in the space, especially from an ownership perspective.
You’ve got all these challenges to even getting into the business, and then you get into the industry, and you’re dealing with the very highly regulated industry and the expense that is associated with seed-to-sale tracking and 24-hour security and all of the early market [challenges that a first-to-market business experiences]. These challenges are hard to overcome for anyone, but when you couple that with someone who may not have access to the capital it takes to react to a regulatory change or even just a natural disaster, that can wipe you out. That can take you out overnight.
CBT: Can you summarize the testimony you delivered at the hearing? What were the main points you presented to the committee?
SP: Essentially, what I shared with the committee was that it is within their jurisdiction as the Committee on Small Business to help address some of the issues that we’re facing in cannabis. I talked about equitable economic development and empowerment and how that impacts the local economy.
One of the most important points that I made is I really want them to understand that we need accountable public action and investment to really take the cannabis industry to the next level, and that’s not happening with big cannabis business. Being able to develop a community—especially a community that’s been impacted by the war on drugs—is going to take small businesses.
I talked about our Model Municipal Social Equity Ordinance. That ordinance is intended to be used by municipalities that have adopted or are currently working on ordinances to regulate, zone and license local cannabis businesses. This model ordinance helps them to make their programs equitable. You’ll see the language around community impacts from these businesses that are coming in. You’ll see language around local hires, diverse hires, re-entry, job training—all of the things that these communities are typically lacking.
We talked about the fact that even with all of this model legislation, we still need access and support from the SBA. The state and municipal social equity and economic empowerment programs are stalled because they’re wasting precious resources testing solutions when the SBA literally fulfills all of those needs, especially when you think about the loan programs [and] the business development resources that they have throughout the country. This is their mission to deliver millions of loans, loan guarantees, contract counseling sessions and other assistance to small businesses. The social equity programs—because there isn’t real access to capital—the participants of these programs are vulnerable to predatory lending and business practices, and so leveraging the SBA would ensure that these participants are able to grow their business and aren’t being taken advantage of and being moved into a worse financial position than they were in to begin with.
[U.S. Rep.] Earl Blumenauer [D-Oregon] said earlier this year, during the MCBA’s Lobby Day, that there will be no comprehensive cannabis legalization bill that does not include strong equity components, and so I led into, again, referencing the SAFE [Secure and Fair Enforcement] Banking Act, a bipartisan piece of legislation that supports the industry, but that also impacts minority business owners and communities impacted by the war on drugs. [U.S.] Rep. [Ed] Perlmutter [D-Colorado] added a markup requiring federal regulators to collect data and provide and annual report on the availability of access to financial services to minority-owned cannabis businesses, and [requiring] that the GAO—Government Accountability Office—carry out a study on barriers to entry for minority-owned cannabis businesses. That led directly into a handful of suggestions—we’re asking SBA to collect data on the availability of SBA products and services to minority-owned cannabis businesses and issue an annual report to Congress, and [to] require SBA to collect and report data on the denial of loans on the sole basis of a prior cannabis conviction. Many of the social equity programs in California and also Massachusetts encourage and prioritize some individuals with prior cannabis convictions for inclusion in their program. So, if we have a state program that’s doing that, but then SBA is not allowing that person to access a loan, then we’re back to square one.
CBT: What was the committee’s general reaction to your testimony, as well as the other testimony overall?
SP: It was well received. There was a member who asked about his constituents that are dairy farmers. For me, this is the low-hanging fruit for SBA, being able to provide a loan that allows a farmer to transition his or her farm to a much more profitable and more sustainable crop. That’s the ideal scenario for an elected official.
I didn’t feel grilled, and the few times that we got derailed and the conversation turned more toward whether legalization was the right or wrong thing to do, the conversation was brought back on track. I thought it was a very productive experience. The ability to now introduce legislation [that] really impacts what’s happening in the industry at the federal level is exactly the kind of momentum we need to see to get to full legalization, the end of federal prohibition. This just shows me that everything I’ve been doing has been the right thing and that we’re getting these small victories.
CBT: What are the next steps for this committee, now that the hearing is over? Will they be taking any immediate action?
SP: I’m expecting legislation to be rolled out. I don’t know the extent of all of it, but MCBA has been involved in making suggestions. You’re trying to reach a group that doesn’t have as much access. Maybe they haven’t used SBA for another business, so they don’t think to go there first. So, it’s got to be a campaign around [the SBA] supporting this industry. Again, part of their mission, part of what they were created to do, is to advocate on behalf of small businesses. So, we need them to step up and advocate on behalf of the industry for banking and eventually the end of federal prohibition. But for today, [they should be] addressing where they stand in terms of helping the cannabis industry, introducing that legislation [and] advocating on behalf of the industry. MCBA will be right there to work side by side to get this done.
Editor’s Note: This interview has been edited for style, length and clarity.