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NYCEDC, a non-profit focused on community development, will receive funding from NYC Small Business Services (SBS) to create the Cannabis NYC Loan Fund
By: Leila Biola Olukoga, Law Clerk at MRTA Law, PC
With the Open Application period underway for NYS Office of Cannabis Management (OCM) Adult-Use licenses, many Social and Economic Equity (SEE) applicants will need funding to realize their dreams. After New York legalized the sale and consumption of Adult-Use cannabis under the Marijuana Regulation and Taxation Act (MRTA), new legal and licensed businesses are vying to compete in this multi-billion dollar industry. Some individuals who received a “Conditional” Adult-Use Retail Dispensary (CAURD) license, and opted against relying on NYS Dormitory Authority (DASNY) services or funding, require start-up capital and loans to launch.
To meet this need for New York City CAURD licensees, on July 17, 2023, the New York City Economic Development Corporation (NYCEDC) released a 32-page Request for Proposal (RFP) for the “Cannabis NYC Loan Fund” outlining the background, requirements, and benefits of providing funding for NYC CAURD and other licensees. NYCEDC, a non-profit focused on community development, will receive funding from NYC Small Business Services (SBS) to create the “Cannabis NYC Loan Fund,” which seeks to develop long-lasting job opportunities, fund small businesses, and maintain sustainable economic growth for cannabis dispensaries in NYC. The Cannabis NYC Loan Fund expects to generate $1.3 billion in sales in its first year and support between 19,000 to 24,000 local jobs within three years.
Applications to Operate the Cannabis NYC Loan Fund were due in September 2023
NYCEDC and SBS will seed and subsidize the Cannabis NYC Loan Fund up to $8 million of subordinated loan capital at a 0% interest rate to subsidize interest rates for loan fund borrowers, with an anticipated 8-year term.
The prevailing RFP bidder will be selected as the Fund Administrator to “source, review, structure, close, and service loans to Borrowers” for a 2% management fee. The Loan Fund will help determine final loan eligibility criteria, underwriting standards, and operational processes in partnership with the selected Fund Administrator and NYCEDC. NYCEDC will base its selection of one or more applicants based off of the following criteria:
- Industry understanding (15%): The proposal will be submitted and evaluated in accordance with the applicant’s understanding of the NYC cannabis industry and fund goals.
- Quality of organization and team (10%): The characteristics of the applicant such as their qualifications, reputation, and financial health.
- Financial terms (60%): The applicant’s proposed financial terms and
- Relevant experience and ability to execute (15%): The applicant’s demonstration of experience and expertise in the Scope of Services contemplated under this RFP.
Cannabis NYC Loan Fund Program Design
The Cannabis NYC Loan Fund is envisioned to offer Office of Cannabis Management (OCM) Social Equity licensees business funding at three various milestones: (1) upon OCM licensure: up to $60,000; (2) upon meeting OCM operational compliance to start sales: up to $175,000; and, (3) upon 6-months of operation without any current liabilities.
This three-step milestone-based financing structure will allow the Loan Fund to “protect against losses and allocate more dollars to businesses with a higher chance of success.” The milestone-based financing structure also minimizes Fund risk by limiting additional funds and progress to meeting milestones.
Borrowers must comply with all Adult-Use cannabis laws and regulations. Through this Cannabis NYC Loan Fund, local entrepreneurs can now strategically, efficiently, and successfully contribute to the economic growth of their once-disadvantaged communities. The Fund’s overarching commitment to the financial equity of communities in the NYC area will enable opportunities for the success and long-lasting presence of cannabis businesses in NYC by offering the necessary start-up capital to businesses demonstrating the critical preparedness and operations to succeed.