In an effort to overturn the policies of the Biden Administration on lending money, SBA, the federal Small Business Administration, has released updated guidelines that clarify that marijuana businesses do not qualify for loan programs.
Researchers from Congress said that in a Monday report on SBA policies, they were updating the guidance regarding “its two biggest small business loan programmes, the 7(a), and 504 guarantee loan programs.” This includes a clarification that cannabis businesses are not eligible for these services.
“Other new loan eligibility modifications in the SOP include…reinstating pre-2023 guidance that removes eligibility for businesses with operations related to marijuana, hemp, and cannabidiol,” it says.
The latest SBA guidelines that go into effect on 1 June reinstate similar language that was excluded in the previous two versions, which were released when Joe Biden served as president. However, legal experts point out that these omissions didn’t necessarily mean that marijuana businesses could access federal loans during this period.
Last year, a group of Democratic Senators asked an important committee to add provisions to a budget bill that would allow small marijuana companies to access SBA services including 7(a), 504 and other loan programs.
But it’s notable—particularly at a time when the Trump administration’s marijuana policy has come under sharp focus by the industry and advocates—that SBA is now taking proactive steps to highlight the cannabis industry’ ineligibility for federal support.
“The last Administration inherited a thriving 7(a) loan program but left it in critical condition—dismantling every common-sense guardrail that kept it solvent and self-sustaining,” SBA Administrator Kelly Loeffler said in a press release that touches on a number of the current administration’s concerns. Biden’s policies of reducing fees for lenders and eliminating underwriting requirements have resulted in a spike in defaults, now threatening the viability as well the taxpayer’s risk.
She said, “Therefore the SBA takes immediate action to restore the prudent lending criteria and rein in risks, saving the 7(a), program, before it falls under the burden of bad policies.” But the actions of the Biden administration to undermine the integrity of the 7(a) program threatens to put taxpayers at risk.
The changes in the SBA guidance are described as being a reverse of the Biden administration’s policy. However, the previous administration did not appear to have opened up the door to allow access to SBA loans for the cannabis industry, even though the language that was removed from the two last versions published in 2023.
The new marijuana provisions are different from those of the 2020 versions that were enacted by the Trump administration prior to his. Specifically, it appears that they allow for more flexibility with regard to loan services. This is especially true for businesses who are not involved in the cannabis business but have a tangential connection.
In the prior guidance, a definition was provided for “indirect” marijuana businesses that are not eligible for 7(a). This includes any business that gets “any portion of its annual gross revenue from Direct Marijuana Businesses (of products or services) that aids in marijuana use, cultivation, enhancement, or development.”
“Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/accounting, policy, regulatory or other issues associated with establishing, promoting, or operating a Direct Marijuana Business. SBA considers a tech company that repairs laptops for Direct Marijuana Businesses to not be assisting in the growth, development, or use of marijuana.
SBA’s latest guidance states that a marijuana-related business, including those who “produce, process, distribute, sell, or market marijuana, marijuana products, edibles or derivatives” is ineligible. This includes businesses that also “sell pipes, bongs and other smoking products, especially if they are intended to be used for marijuana, as well as any business marketing the product for that purpose.”
The new version clarifies, as did the previous document, that hemp-growing businesses operating legally are eligible to receive assistance under the program.
The SBA Lender has to obtain documentation from the applicant that is sufficient to show the hemp fits the definitions. SBA Lenders are also responsible for getting documentation from applicants who plan to grow, produce, or process hemp. This will ensure the product and the products they will extract and produce continue to comply with the definitions.
SBA’s new guidelines help to create a complicated, rapidly shifting narrative around marijuana policy from the Trump administration.
One of the most recent—and, for the industry, troubling—developments came last week from the U.S. attorney for Washington, D.C., who recently warned a local medical marijuana dispensary about potential federal law violations, hinting at the threat of enforcement action.
Ed Martin, the Interim U.S. attorney for the District of Columbia said that while shutting down dispensaries is not “at the top of” his list of priorities, his “instinct tells me it shouldn’t happen in the neighborhood.”
Late last month, meanwhile, the White House called the District’s move to decriminalize marijuana an example of a “failed” policy that “opened the door to disorder.”
During Trump’s first term in the White House, he maintained that D.C. rider to keep blocking cannabis sales in his budget requests, as did his successor, former President Joe Biden.
Jeff Sessions also rescinded Obama’s guidance during Trump’s earlier tenure, which generally instructed federal prosecutors against interfering with state marijuana laws.
As advocates and industry stakeholders have waited to see how the Trump administration will navigate cannabis policy issues during the current term—and whether the president will push for reforms such as rescheduling and banking access as he endorsed on the campaign trail last year—the fact his White House’s first public mention of marijuana in its D.C.-focused fact sheet linked decriminalization to disorder sent a different message.
Meanwhile last week, an activist who received a pardon for a marijuana-related conviction during Trump’s first term paid a visit to the White House, discussing future clemency options with the recently appointed “pardon czar.”
Separately, a marijuana industry-backed political action committee (PAC) has released a series of ads over recent weeks that have attacked Biden’s cannabis policy record as well as the nation of Canada, promoting sometimes misleading claims about the last administration while making the case that Trump can deliver on reform.
Its latest ad accused former President Joe Biden and his Drug Enforcement Administration (DEA) of waging a “deep state war” against medical cannabis patients—but without mentioning that the former president himself initiated the rescheduling process that marijuana companies want to see completed under Trump.
Adding uncertainty to that process, Trump’s pick to lead DEA, Terrance Cole, is on record repeatedly voicing concerns about the dangers of marijuana and linking its use to higher suicide risk among youth.
The current acting administrator, Derek Maltz, has separately made a series of sensational claims about marijuana, calling it a gateway drug that sets children up to use other substances, suggesting marijuana use is linked to school shootings and alleging that the Justice Department “hijacked” the cannabis rescheduling process from DEA.
Earlier this month, DEA notified an agency judge that the marijuana rescheduling process is still on hold—with no future actions currently scheduled as the matter sits before Maltz.
Meanwhile, a recent poll found that a majority of Republicans back a variety of cannabis reforms. Notably, Republicans are more likely than the average voter to support allowing state governments to legalize pot without federal interference.
A majority of both voters overall (70%) as well as GOP voters (67%) supported a reclassification for cannabis.
The survey was first noted by CNN in a report last month that quoted a White House spokesperson saying the administration currently has “no action” planned on marijuana reform proposals, including those like rescheduling and industry banking access that Trump endorsed on the campaign trail last year.
The White House has also said that marijuana rescheduling is not a part of Trump’s drug policy priorities for the first year of his second term—a disappointment for advocates and stakeholders who hoped to see him take speedier action.
Meanwhile, former marijuana prisoners who received clemency from Trump during his first term staged an event outside the White House earlier this month, expressing gratitude for the relief they were given and calling on the new administration to grant the same kind of help to others who are still behind bars for cannabis.
SBA 2025 guidance regarding cannabis loan eligibility
What types of business are ineligible?
The SBA Lender must determine whether the Applicant is one of the types of businesses listed as ineligible (13 CFR § 120.110). Listed business types may qualify under certain circumstances.
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8. The eligibility of businesses that have engaged in activities that violate federal, state or local laws is not allowed. 13 CFR § 120.110 (h)
a. Candidates who engage in unlawful activity according to federal, local, or state law will not be eligible. This also includes applicants who sell, promote, market, and service products and services that are used to support illegal activities, unless the use is completely outside of their intended target market. The SBA Lender must obtain from the applicant documentation that proves the products are legal under state and federal laws.
b. Marijuana. Because federal law bans the sale and distribution of marijuana, most financial transactions in a marijuana business involve illegal funds. Businesses that generate revenue through marijuana-related businesses may not be eligible for SBA assistance. A business’s nature determines its eligibility. Ineligible are businesses that produce marijuana, marijuana products, edibles and derivatives. Businesses that market smoking devices, pipes bongs or inhalants or sell other products, are also excluded. The law applies equally to medical and recreational marijuana use, regardless of whether the business in question is permitted under the local or state laws where the applicant is located.
Hemp: According to the Agriculture Improvement Act of 2018(Public Law No. 115-334, a business which grows, produces or processes hemp products, and distributes them, is only eligible if it meets both the section 297A of Agricultural Marketing Act of 1947, as well as any state-specific definition of hemp. It is important to remember that certain states have a different definition of hemp, which has a lesser level THC. It is the responsibility of the SBA Lender to obtain from the applicant documentation that demonstrates the hemp meets all applicable definitions. The SBA Lender must also obtain from the applicant documentation that demonstrates the company’s testing protocol for hemp. This is important for applicants who are growing, processing, or producing hemp.
Cannabidiol: These factors are to be taken into consideration when determining eligibility for CBD-related business.
i. The CBD source (whether it is hemp or marijuana);
ii. How are the products produced or sold? (Example: topical products, products for ingestion). Based on FDA guidance, it is illegal under the Food, Drug, & Cosmetic Act to add CBD to any food (human or animal), any dietary supplements, and certain cosmetics because cannabidiol is the active ingredient of an FDA-approved drug and has not been approved for other use. FDA Regulation of Cannabis and Cannabis Products, including Cannabidiol.
iii. Which health claims are made, if at all, about the product or products;
iv. Check whether all products are produced, sold, or distributed in accordance with applicable laws, rules and regulations at the federal, local, and state levels, as well as those issued by FDA.
v. It is the responsibility of the SBA Lender to obtain from the applicant documentation that demonstrates the compliance with federal, state and local laws, regulations and applicable legislation, as well as the necessary lab certificates.
The previous guidance for 2020 is available here:
What types of business are ineligible?
The SBA Lender must determine whether the Applicant is one of the types of businesses listed as ineligible in SBA regulations (13 CFR § 120.110). Some business types on the list are eligible in certain circumstances.
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8. Businesses Engaged in any Illegal Activity 13 CFR § 120.110 (h)
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b. Marijuana-Related Businesses:
i. Financial transactions in a marijuana business will generally be based on funds that are derived illegally. Businesses that generate revenue through marijuana-related activity or support marijuana’s end use may not be eligible for SBA assistance.
ii. The nature of a company’s operations determines its eligibility. These businesses are not eligible:
a) “Direct Marijuana Business” – a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. The same applies for recreational and medical uses, even if the activity is permitted under the local or state laws where the applicant is located.
b) “Indirect Marijuana Business” – a business that derived any of its gross revenue for the previous year (or, if a Start-Up Business, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana. Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/accounting, policy, regulatory or other issues associated with establishing, promoting, or operating a Direct Marijuana Business. SBA considers a plumber that fixes a drain for a Direct Marijuana Business, or a company like a Tech Support Company who repair a laptop to help with the development, use or growth of marijuana.
Other businesses can be considered indirect marijuana businesses if their products, such as smoking pipes, bongs and inhalants are designed or intended primarily for marijuana usage or they market the product for that use.
iii. In accordance with Public Law No. 115-334, a business that grows, produces or sells products made from hemp is only eligible if the hemp meets both section 297A of the Agricultural Marketing Act of 1946 and any applicable state definition of hemp. 115-334, a business which grows, produces or processes hemp products, and distributes them, is eligible for the tax credit only if that hemp meets section 297A of Agricultural Marketing Act of 1945, as well as any state-specific definition of hemp. It is important to remember that certain states have a different definition of hemp, which has a lesser level THC.
It is the responsibility of the SBA Lender to obtain from the applicant documentation that will demonstrate the hemp conforms with the relevant definitions. The SBA Lender must also obtain from the applicant documentation that demonstrates the company’s testing protocol for hemp. This is important for applicants who are growing, processing, or producing hemp.
iv. Businesses that are CBD related: There are many factors to consider when determining eligibility for CBD-related business. These include but not limited to:
What is the CBD derived from? (Hemp or Marijuana);
b. What type of product is being manufactured and/or sold? (e.g. products for topical use or products intended to be consumed);
c) Are there any health claims made by the manufacturer(s) about this product?
If you are unsure, ask your doctor.
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