How New York’s Plan for Reparations Became a Debt Trap for Marijuana Retailers

Other retailers said they were treated like Mr. Conner: By the time they were presented with the loan agreement, they were too deeply invested to turn it down. They had little say in how their stores were designed, built and furnished, but the fund refused to break down the costs. When retailers pushed back, the fund threatened to take their stores.

To reassure licensees they’d be able to pay back the loans, the fund offered unrealistic sales projections, the borrowers said. Alex Ortecho, 40, said the fund’s estimates showed his store, Bronx Joint, making at least $330,000 in sales a month. But since opening last March, the store’s monthly sales have peaked at $290,000.

Cannabis businesses typically spend more than half their income on federal taxes alone because they cannot deduct common expenses like rent and payroll. After setting aside taxes and paying his bills, Mr. Ortecho said there is little money left to pour back into the business. He’s already had to cut prices to compete with an illicit seller around the corner. The city has stepped up efforts to close unlicensed cannabis shops, but Mr. Ortecho’s competition operates from a house. In addition to running the dispensary, Mr. Ortecho works full-time as an anesthesia technician.

“They just put in your ear that this is going to be life-changing,” he said.

Mr. Butler, the fund’s publicist, said the fund’s loans were more generous than federal small business loans, which are designed for disadvantaged borrowers but exclude cannabis sellers. (The loans carry similar interest rates, but unlike with the fund, federal borrowers retain control of how their loans are spent.) The financial projections were merely training tools, he added, though retailers and regulators say they were presented as realistic calculations.

Still, Mr. Butler blamed low sales revenue on the lack of enforcement against illicit sellers and the availability of higher-quality products from out of state. Ultimately, he said, the retailers’ success “will depend on the acumen and hard work of operators and the state’s success in crafting a robust marketplace.”