New legislation in Connecticut makes it a lot easier for businesses to start providing legal cannabis. However, there are several challenges that will have to be overcome before the local market can truly flourish and compete with other states. Expert opinions vary on how this is going to play out over time.

Federal law poses challenges to new CT cannabis businesses



Lisa Capitani knew she’d need help when she chose to create a small company to educate and counsel medicinal marijuana users.

Her application was just declined since the program is sponsored by a grant from the United States Small Business Administration, and marijuana usage is prohibited in the United States. Capitani’s experience is only one of many additional roadblocks that cannabis-related firms face before they ever get off the ground.

Cannabis-related firms have a hard time getting financing to get started. They are turned down for government support. They are not eligible for the same tax breaks as other firms. They are unable to utilize Quickbooks.

These impediments are usually caused by the same problem: state legislation that contradicts federal law on the legalization of cannabis.

“There are enough hurdles with attempting to break into this new semi-regulated cluster mess of a business,” Capitani said, “that it would be useful if the state supplied some type of access, some kind of access to the kinds of services that other firms have access to.”

In response to a request for comment from Hearst Connecticut Media Group, a national SCORE spokesman cited the Small Business Administration’s 2019 policy on marijuana-related firms. Businesses that “derive money from marijuana-related activities or encourage marijuana end-use” may be disqualified for SBA-funded technical assistance, according to the guidelines.

According to the policy, the decision should be taken on a case-by-case basis.

“SCORE is a federal grant recipient and a resource partner of the US Small Business Administration,” a spokesperson said in an email. “As a result, SCORE is prohibited from mentoring any client whose company is unlawful or criminal under federal law.”

Capitani’s purpose with the company is to provide guidance and education to patients as they begin the process of using medicinal marijuana. She’s also a patient. Her severe pain has been relieved by cannabis, and she guided her brother through the process when he began using it to alleviate some of the negative effects of his cancer treatments.

“It’s a difficult procedure, and it’s helpful to have someone who has a medical background and can talk with and advocate for them,” she added.

The National Cannabis Industry Association’s chief executive officer, Aaron Smith, said he hears about difficulties like Capitani’s on a regular basis. He went on to say that securing start-up financing is the most prevalent issue that cannabis firms face.

Many banks are reticent to lend to cannabis-related firms, and many banks make it difficult for such businesses to use their depository services. The Bank Secrecy Act of 1970, which tries to combat money laundering, compels institutions to report suspected fraud, laundering, or money coming from unlawful activities to the Financial Crimes Enforcement Network.

According to Smith, cannabis-related firms often rely on private loans or personal funds to get started.

“The issue is that many small enterprises and entrepreneurs don’t have access to private funding,” he said. “Especially underserved communities of color and other marginalized groups.”

Connecticut has taken efforts to guarantee that areas most affected by the drug war are represented in the new adult-use program, such as mandating half of licensees to be “social equity applicants” and developing a mentoring and collaboration program between social equity and other licensees.

The state also intends to create a lending fund for social equity applicants.

This does not include cannabis-related firms that do not sell or grow marijuana, such as Capitani’s.

Normal company expenditures like as marketing, payroll, and security costs are also not tax deductible under the federal tax rules for marijuana enterprises. However, according to the Internal Revenue Service’s website, the cost of products may be deducted.

Cannabis-related firms are also out of the running for government loans and other programs offered by the Small Business Administration as a result of the regulation.

“It’s like we’re in the current prohibition age,” he said. “We’re not seeing SWAT squads breaking down doors of state-licensed cannabis companies, but there are all these ramifications that federal law has on the market that make it pretty scary to enter into cannabis,” says the author.

Even basic services like Intuit Quickbooks are often unavailable to cannabis firms, said to Smith. Marijuana enterprises are listed on the website of the accounting software as forbidden business kinds.

Janna Champagne, a founding member of the Cannabis Nurses Network, has spent years working in the cannabis industry. She currently runs Integrated Holistic Care, which provides medical marijuana and CBD-related health counseling and education.

In 2014, Champagne became a patient and advocate. She specializes in the treatment of autism using cannabis.

While she believes the stigma and hurdles have lessened since she began her medical marijuana journey, she believes it is still tough for individuals to get started. She’s worked in a number of capacities in Oregon, and she was refused 501 C-3 registration in 2018 because her employment included cannabis, she claimed.

According to her, the foundation would have granted scholarships to patients who couldn’t afford cannabis education classes.

“The hurdles to beginning a company are improving in baby stages, and sometimes it’s one step forward and two steps back,” she added.

Small enterprises, like as Capitani’s planned outfit, are disproportionately hit by “government stigma,” as Champagne puts it.

Capitani hopes to spend the next three weeks developing her business strategy after being rejected from the mentoring program. She’s also phoning lawyers to advise her through the problems she could encounter, which is something she thought the SCORE program might help with.

“It’s simply upsetting that there is an entity within the system, inside our state, that could assist me but will not,” she added.

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