Federal loan memo warns banks about working with hemp producers

hemp financial lending, Federal loan memo warns banks about working with hemp producers

Hemp advocates are calling foul after a federal agency that regulates farm lending warned financial institutions not to work with hemp producers in states without U.S. Department of Agriculture-approved plans.

The July 12 memo from the U.S. Farm Credit Administration (FCA) – an independent agency that regulates financial institutions that lend to farmers – tells its four banks and 67 associations that they should ask for criminal background checks and documentation that a hemp applicant’s state has been approved by the USDA.

However, some of the nation’s largest hemp-producing states, including California, Colorado and Oregon, don’t have the USDA’s blessing. That’s because the states are either operating under older rules for the 2021 season or because the USDA is still reviewing their plans.

The memo also warns banks that they should consider:

  • That state and local law enforcement “could make hemp production more difficult.”
  • Whether hemp markets exist.
  • How the loan would be repaid if the crop goes hot.
  • The status of U.S. Food and Drug Administration enforcement on how hemp can be used.

Vermont hemp farmer Rick Fox told AgriPulse, which first reported the memo, said the guidance “will likely deter lenders” from the hemp industry.

The FCA told AgriPulse that its memo was not intended to deter hemp lending.

“What we tried to convey in this memo was that if you, as an institution, are going to finance hemp, these are things you should consider,” said Lori Markowitz, senior policy analyst in the FCA’s Office of Regulatory Policy.

The memo reiterates that marijuana businesses are “still considered illegal at the federal level.”