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NJ Cannabis Entrepreneurs Assistance Bill Passes Committee

Senator Troy Singleton’s (D-Burlington) bill to help cannabis NJ entrepreneurs with access to capital and assistance passed the NJ Assembly Health Committee again with amendments and bipartisan support.

Chair Herb Conaway (D-Burlington) said Assembly Speaker Craig Coughlin (D-Middlesex) intervened to have the amendments passed by the committee.

Current law prevents any entity from holding more than one permit for a medical cannabis cultivator, manufacturer, or dispensary. The bill (A-5179) was sponsored by Assemblymembers Brian Bergen (R-Morris), Jamel Holley (D-Union), and Verlina Reynolds-Jackson (D-Mercer). Investors in a medical cannabis dispensary permit would be allowed to own 35 percent interest in seven medical cannabis dispensaries. That is provided those businesses are minority, woman, or disabled veteran-owned.

Legislation Details

Business owners would be required to pay back the financial assistance they receive from an investor. It would be within a period determined by the loan size. In addition, the NJ cannabis entrepreneurs bill specifies ownership would not revert to the investor if the business were to default. 

The Cannabis Regulatory Commission (CRC) would be permitted to review the agreement between the business owner and investor. They need to ensure the terms are commercially reasonable and consistent with fair market value.  

“Lack of access to capital is one of the biggest barriers women, minority, and disabled veteran entrepreneurs face when trying to become business owners. Lower wages mean these individuals generally have fewer personal savings or opportunities to borrow external funds. In fact, the vast majority of startups backed by investors are overwhelmingly white and male-owned,” the sponsors said in a statement.

Allowing investors to have partial ownership of more than one medical cannabis dispensary, the sponsors believed, would incentivize investors to sink money in minority or women-owned businesses.

“Minorities have historically been disproportionately impacted our country’s War on Drugs. It is only fair they have the opportunity to benefit from this substance’s legitimization as the medical cannabis industry advances,” the sponsors said in a statement.

NJ Cannabis Industry Assistance Process

The amendments require applicants for an Alternative Treatment Center (ATC) permit to submit to the CRC copies of services agreements an applicant has made with a third-party entity with their application.

The CRC can then review agreements that would provide significant financial or technical assistance, or intellectual property to an applicant, to determine whether the terms of the agreement are commercially reasonable and consistent with fair market value.

If the CRC finds the terms are not reasonable and consistent with fair market value, they can withhold approval of an ATC permit application until the parties negotiate a new agreement. It must have commercially reasonable terms and be consistent with fair market value, as determined by the CRC.

At the CRC hearing last night, the idea of a third party controlling the licenses of equity applicants and micro businesses was raised. It was thought that would have negative consequences.

Helping NJ Cannabis Entrepreneurs

While lacking access to capital, a cannabis entrepreneur is bound to fail, Assemblyman Brian Bergen (R) said.

“It’s just not possible,” he said.

Bergen believed few NJ cannabis entrepreneurs with limited resources getting a license could succeed in the industry.

Bergen said he’s been in the situation as a small business owner of needing to raise money quickly. He noted it takes a couple hundred thousand dollars for an NJ cannabis entrepreneur to have sufficient capital.

“That’s a huge barrier to entry,” Bergen said.

Thus, the bill was introduced to ensure NJ cannabis entrepreneurs can enter the industry and maintain their licenses.

Bergen said that the high costs of starting up would lead to a monopoly developing. Thus, he noted that protections against a monopoly had to be implemented.

“Being a small business owner is tough,” Bergen said. He noted credit is hard to get for even a normal business.

“It gives them a shot,” he said regarding cannabis entrepreneurs, the bill, and the amendment.

Bergen noted the amendment ensures investors are not predatory and cannot own more than 35 percent of the business. In addition, third-party entities can invest in up to seven entities. It was previously 40 percent of a business and ten entities.

The Senate version of the bill passed on December 17th, along with New Jersey’s legalization implementation and decriminalization.

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