With the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, thousands of American businesses are entitled to economic relief during the COVID-19 pandemic. Most hemp and CBD businesses should qualify for some aid, but the type of assistance may vary depending on which sector of the market a company is in –and whether there will be enough funds to reach them.
CBD companies in need of assistance have several types of relief to choose from. The Small Business Administration (SBA) has four programs available – at least in theory. The Paycheck Protection Program (PPP) has provided $349bn in relief to help small business retain their employees. Businesses with 500 employees are eligible, and the loan may be forgiven if at least 75% of it is spent on payroll.
The SBA also offers an Economic Injury Disaster Loan (EIDL), which provides up to $10,000 to small businesses (500 or fewer employees) to help them survive despite revenue losses. The SBA Express Bridge Loans and SBA Debt Relief may also be an option for qualifying businesses. More information about these programs can be found on the SBA’s website.
However, the SBA announced last week that it had run out of money for the PPP and EIDL programs and is unable to accept any more applications until Congress appropriates more funds for them.
It is not yet known whether Congress will impose any further eligibility restrictions on these programs if and when it appropriates more funds but it has started the process of approving the expenditure.
The US Senate approved another $310bn for PPP late yesterday (21st April). The bill is now expected to go to the House and then to president Donald Trump to be signed – a move he is widely expected to follow through.
The SBA clarified in a 2019 notice that companies that sell or produce hemp or hemp-derived products are entitled to the SBA’s assistance, thanks to the legalisation of hemp by the 2018 Farm Bill. Likewise, CBD companies are eligible as long as their CBD products are derived from hemp and not marijuana.
“We have not heard of CBD companies having problems accessing dollars,” Jonathan Miller, general counsel for the US Hemp Roundtable, told CBD-Intel.
However, any business seeking SBA assistance should be that it is not associated in any way with marijuana, as the SBA broadly prohibits marijuana-related businesses from its services because of the federal prohibition on marijuana.
As stated in the 2019 notice, the prohibition extends also to any “Indirect Marijuana Business”, which is defined as “a firm that derived any of its gross revenue for the previous business year…from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, distribution, enhancement or other development of marijuana”.
Relief for farmers
Initially the SBA excluded farmers from receiving aid from the EIDL program. Instead Miller said that farmers should be able to access money from the PPP when funds are available.
However lawmakers made a change following sustained lobbying from various groups.
For example eighty-six members of Congress wrote to SBA administrator Jovita Carranza seeking an explanation and stressing that excluding farmers from relief was contrary to congressional intent.
The pressure seemingly worked and farmers can now access EIDL aid.
Hemp farmers are also entitled to some relief from another federal agency – the US Department of Agriculture (USDA).
The USDA has created the Coronavirus Food Assistance Program (CFAP) with $19bn allotted to it from the CARES Act. The program is intended to help farmers whose prices and supply chains have been negatively impacted, though the eligibility requirements have not yet been determined.
What This Means: Assistance is a hotly debated and rapidly evolving subject in the US. Already congressional representatives are debating further measures in a bill to replenish funds. CBD-Intel will keep track of developments and provide further updates.
– Anthony Traurig CBD-Intel contributing writer