ORIG 12/20/17 Jeremy Kwit recently changed the name of his marijuana retail business to Substance. He is adding locations and other changes to the business as well. Kwit is pictured at his facility on NE Division St. in Bend on Wednesday, December 20, 2017. (Joe Kline/Bulletin photo)

While other Oregon businesses have taken $7 billion in federal bailout money since the start of the pandemic and through August, cannabis companies cannot qualify.

Even though the industry, from farm to store, contributed $133 million to state coffers this fiscal year, its products are considered a banned substance, the most restricted by the Drug Enforcement Agency.

That means these businesses cannot qualify for Paycheck Protection Program loans; they can’t file for bankruptcy protection or use a federally insured bank. And after wildfires wiped out the towns of Talent and Phoenix in Southern Oregon, cannabis companies weren’t able to qualify for Federal Emergency Management Agency relief loans or funds.

Yet, at the height of the pandemic, Gov. Kate Brown deemed cannabis firms essential businesses and the regulatory agency, the Oregon Liquor Control Commission, raced to adopt rules that made for contactless transactions. In September, the OLCC made curbside pickup permanent to help the industry, but many had to quickly launch online shopping platforms.

This adaptability is the hallmark of the cannabis industry, said Beau Whitney, economist at Whitney Economics headquartered in Portland.

“The conflict is a stark reminder of how there’s this disconnect between a robust industry like cannabis and an antiquated federal law that classifies cannabis,” Whitney said. “It wouldn’t take much in terms of federal reform to provide these companies with a safety net. This isn’t like a huge bail out for an airline or the banking industry.”

By allowing curbside pickup, cannabis companies could maintain social distancing and protect the employees and the customers, Whitney said. There are about 22,500 people employed in the recreational cannabis industry in Oregon, he said.

Jeremy Kwit, who owns three Substance stores in Bend, said the curbside pickup helped keep the store compliant with federal workplace laws, like the Americans With Disabilities Act or the Occupational Health and Safety rules.

“It’s interesting; we’re essential but not equal,” Kwit said. “We’ve been affirmed by humanity and recognized that cannabis is integrated into everyone’s well -being. If anything, COVID-19 has shown us how much the community relies on cannabis as a coping mechanism.”

Both industrial hemp, which two years ago was removed from the federal Controlled Substances Act, and recreational cannabis look like the same plant, except hemp is regulated as a farm product.

Eleven states allow recreational use of cannabis: Alaska, California, Colorado, Illinois, Oregon, Washington, Massachusetts, Washington, D.C., Michigan, Nevada and Vermont. Medical marijuana is legal in 22 states.

“It’s just heartbreaking,” said Lindsey Pate, owner of Glass House Grown, a Central Oregon craft cannabis firm. “I don’t know of anyone who applied for a (Paycheck Protection Program loan). I think we all knew it would not work if we’re being honest.”

Because federal law prohibits the distribution and sale of marijuana, the Small Business Administration, which oversees the Paycheck Protection Program loans, can’t provide financial assistance to businesses that receive revenue from cannabis, said Sean Wilson, U.S. Small Business Administration public affairs specialist.

If these loans are used by businesses to pay for payroll, mortgage, rent or utilities and the businesses request forgiveness, the loans will not have to be paid back. Businesses also must maintain these expenses for eight weeks, according to the administration’s website.

Kwit said the restrictions from taking advantage of federal funds even extends to his workers trying to improve themselves by signing up for management classes at the Central Oregon Community College Small Business Development Center. Workers would sign up for classes, only to be turned away because a small portion of the center’s funding comes from the Small Business Administration.

Over the years, cannabis companies have turned to the Small Business Development Center, which gives advice and holds classes to help small businesses, said Ken Betschart, Small Business Development Center director. In the past year the center has helped double the amount of businesses, he said.

About 10% of the center’s funding is federal dollars.

“Cannabis companies have a greater tax burden than any other businesses and yet are not able to receive any support or funding from the government, including during a pandemic,” said Kale Gray, CEO of Tokyo Starfish in Bend.