From state regulations to finding financing, Illinois cannabis craft growers face multiple obstacles
Craft grower marijuana licenses are supposed to help Black and brown communities, yet only one business is open.
Reese Xavier has a vision for a vacant strip mall in south suburban Chicago Heights centered around Illinois’ newest billion-dollar industry: cannabis.
A craft grow operation, a kitchen, dispensary and consumption lounge will eventually replace what years ago used to be a hardware store, a boxing gym, resale shop and a tax preparer.
After spending 25 years in corporate training and development, he decided in 2019 to start HT23 Growers.
“I thought if I could find a company that could be rooted in the community, that could provide economic opportunity, maybe that could change things around,” Xavier said. “And I thought maybe cannabis could be the tool to make that happen.”
But he and the vast majority of future craft growers in Illinois are facing significant obstacles. It’s been three years since recreational cannabis became legal in Illinois. Out of 88 licenses issued, so far only one facility has opened and only one secured a loan through a state program set up specifically for marijuana businesses. Craft growers are finding it difficult to get financing or outside investments and they’re hamstrung by state regulations. Plus, they only have until March 1 to be ready to operate. Xavier is among those 88 applicants selected by a state lottery for a conditional craft grow license. These licenses were created, in part, as a way to help people get into the cannabis industry who otherwise wouldn’t have the means to do so.
All of the licenses issued went to social equity applicants, which means the principal owners of the company lived in a disadvantaged area for most of the last 10 years or were convicted of cannabis offenses. They can also be considered a social equity company if the majority of their workforce comes from a disadvantaged area. Illinois’ recreational cannabis law has certain criteria as to what constitutes such an area, but it generally refers to Black and brown communities hit hardest by past drug enforcement policies.
Craft cannabis is like craft beer because the product is made up of unique, smaller batches. In Illinois, Verano and Cresco have been operating since the pilot medical marijuana program began. They’re like Miller Brewing Company and Budweiser in the cannabis industry, so their products can be found in a lot of dispensaries.
The state law currently allows the craft facilities to use up to 5,000 square feet to grow plants, with the eventual ability to expand to 14,000. The big players can be as large as 210,000 square feet, which Xavier says has made it hard to attract investors.
“One of the main questions they ask is, ‘Well, how much can you grow?’ And we have to start with 5,000 square feet,” Xavier said. “And as I quickly try to say, ‘Well, we can go up to 14,000,’ they say, ‘Well, wait a minute, what are the big folks doing?’ ”
There was a measure in the state Legislature to fix that, which cannabis businesses have wanted for years, but passing marijuana-related legislation in Illinois is hard.
State Sen. Cristina Castro, D-Elgin, had a bill to allow craft growers to use 14,000 square feet of grow space immediately. It languished for nearly a year and died when the last General Assembly finished up. Now new lawmakers have been sworn for a fresh two-year term and Castro has to start over.“My commitment is to continue working on this,” Castro said. “I know there are other things that the industry and also craft growers are looking into. So maybe it can become part of a small package.”
But even if that measure had become law, there’s no guarantee that cannabis businesses would have the capital needed to use all the space — and there’s no guarantee investors would come back.
The Illinois Department of Commerce and Economic Opportunity (DCEO) realized there was a need and set up a loan program with Credit Union One and Good Tree Capital. Craft growers can get up to $1 million — half of it from the state, the other half from one of the lenders.
Credit Union One turned down Xavier. They didn’t tell him why, and they didn’t respond to questions from WBEZ. He does have an idea though.
“I would imagine the lending institution has to evaluate a start-up company, social equity applicants [with] no cash flow. Oftentimes, we’re not millionaires,” he said.
DCEO Spokeswoman Emily Bolton acknowledged those challenges and others in an email, saying a certain level of uncertainty is expected anytime a new program is launched.
“The complexities of navigating a new industry that remains illegal under federal law, as well as institutions’ fiduciary, regulatory responsibilities and underwriting standards that are set independent of the program presented challenges,” Bolton said.
A new state direct forgivable loan program for cannabis businesses launched in November 2022, which made $8.5 million in fully forgivable loans available directly from the state. Anyone with a conditional license can still apply for a loan through both programs.
But craft cannabis advocates are concerned it might be too late for this cohort of license holders.
“I’m not naive to the uphill challenges that any small business faces, but I really do believe at this point that we’re being set up to fail,” said Lisbeth Vargas Jaimes, executive director of the Illinois Independent Craft Growers Association.
She said only one craft grow operation has opened so far in Illinois, and even though DCEO said several more are close to getting approved for financing, everyone with a conditional license has to be ready to operate by March 1.“Our fear is March 1 is going to come around the corner and people who weren’t able to be operational leading up to that are going to be forced to either buckle, lose their license or sell,” Vargas Jaimes said.
The Illinois Department of Agriculture, which oversees craft grow licenses, said the deadline has already been extended multiple times due to COVID-19, legal challenges and other problems. The department didn’t say whether it would be extended again.
Xavier is confident that it will be and he’ll be operational within six months.
In the meantime, he’s going to use his infuser license to make things like gummies and vape cartridges.
“We’re trying to scale back our need to the bare minimum, break it up into phases, become operational, generate some money and then be able to move forward on a second phase.”
Xavier thinks it’ll take about $9 million to get fully up and running. As he crowdfunds, invests his own money and starts infusing — he said the state hasn’t held up its end of the deal.
And so he waits.
Alex Degman is an Illinois statehouse reporter for WBEZ. Follow him @Alex_Degman.
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From state regulations to finding financing, Illinois cannabis craft growers face multiple obstacles
Craft grower marijuana licenses are supposed to help Black and brown communities, yet only one business is open.
Reese Xavier has a vision for a vacant strip mall in south suburban Chicago Heights centered around Illinois’ newest billion-dollar industry: cannabis.
A craft grow operation, a kitchen, dispensary and consumption lounge will eventually replace what years ago used to be a hardware store, a boxing gym, resale shop and a tax preparer.
After spending 25 years in corporate training and development, he decided in 2019 to start HT23 Growers.
“I thought if I could find a company that could be rooted in the community, that could provide economic opportunity, maybe that could change things around,” Xavier said. “And I thought maybe cannabis could be the tool to make that happen.”
But he and the vast majority of future craft growers in Illinois are facing significant obstacles. It’s been three years since recreational cannabis became legal in Illinois. Out of 88 licenses issued, so far only one facility has opened and only one secured a loan through a state program set up specifically for marijuana businesses. Craft growers are finding it difficult to get financing or outside investments and they’re hamstrung by state regulations. Plus, they only have until March 1 to be ready to operate. Xavier is among those 88 applicants selected by a state lottery for a conditional craft grow license. These licenses were created, in part, as a way to help people get into the cannabis industry who otherwise wouldn’t have the means to do so.
All of the licenses issued went to social equity applicants, which means the principal owners of the company lived in a disadvantaged area for most of the last 10 years or were convicted of cannabis offenses. They can also be considered a social equity company if the majority of their workforce comes from a disadvantaged area. Illinois’ recreational cannabis law has certain criteria as to what constitutes such an area, but it generally refers to Black and brown communities hit hardest by past drug enforcement policies.
Craft cannabis is like craft beer because the product is made up of unique, smaller batches. In Illinois, Verano and Cresco have been operating since the pilot medical marijuana program began. They’re like Miller Brewing Company and Budweiser in the cannabis industry, so their products can be found in a lot of dispensaries.
The state law currently allows the craft facilities to use up to 5,000 square feet to grow plants, with the eventual ability to expand to 14,000. The big players can be as large as 210,000 square feet, which Xavier says has made it hard to attract investors.
“One of the main questions they ask is, ‘Well, how much can you grow?’ And we have to start with 5,000 square feet,” Xavier said. “And as I quickly try to say, ‘Well, we can go up to 14,000,’ they say, ‘Well, wait a minute, what are the big folks doing?’ ”
There was a measure in the state Legislature to fix that, which cannabis businesses have wanted for years, but passing marijuana-related legislation in Illinois is hard.
State Sen. Cristina Castro, D-Elgin, had a bill to allow craft growers to use 14,000 square feet of grow space immediately. It languished for nearly a year and died when the last General Assembly finished up. Now new lawmakers have been sworn for a fresh two-year term and Castro has to start over.“My commitment is to continue working on this,” Castro said. “I know there are other things that the industry and also craft growers are looking into. So maybe it can become part of a small package.”
But even if that measure had become law, there’s no guarantee that cannabis businesses would have the capital needed to use all the space — and there’s no guarantee investors would come back.
The Illinois Department of Commerce and Economic Opportunity (DCEO) realized there was a need and set up a loan program with Credit Union One and Good Tree Capital. Craft growers can get up to $1 million — half of it from the state, the other half from one of the lenders.
Credit Union One turned down Xavier. They didn’t tell him why, and they didn’t respond to questions from WBEZ. He does have an idea though.
“I would imagine the lending institution has to evaluate a start-up company, social equity applicants [with] no cash flow. Oftentimes, we’re not millionaires,” he said.
DCEO Spokeswoman Emily Bolton acknowledged those challenges and others in an email, saying a certain level of uncertainty is expected anytime a new program is launched.
“The complexities of navigating a new industry that remains illegal under federal law, as well as institutions’ fiduciary, regulatory responsibilities and underwriting standards that are set independent of the program presented challenges,” Bolton said.
A new state direct forgivable loan program for cannabis businesses launched in November 2022, which made $8.5 million in fully forgivable loans available directly from the state. Anyone with a conditional license can still apply for a loan through both programs.
But craft cannabis advocates are concerned it might be too late for this cohort of license holders.
“I’m not naive to the uphill challenges that any small business faces, but I really do believe at this point that we’re being set up to fail,” said Lisbeth Vargas Jaimes, executive director of the Illinois Independent Craft Growers Association.
She said only one craft grow operation has opened so far in Illinois, and even though DCEO said several more are close to getting approved for financing, everyone with a conditional license has to be ready to operate by March 1.“Our fear is March 1 is going to come around the corner and people who weren’t able to be operational leading up to that are going to be forced to either buckle, lose their license or sell,” Vargas Jaimes said.
The Illinois Department of Agriculture, which oversees craft grow licenses, said the deadline has already been extended multiple times due to COVID-19, legal challenges and other problems. The department didn’t say whether it would be extended again.
Xavier is confident that it will be and he’ll be operational within six months.
In the meantime, he’s going to use his infuser license to make things like gummies and vape cartridges.
“We’re trying to scale back our need to the bare minimum, break it up into phases, become operational, generate some money and then be able to move forward on a second phase.”
Xavier thinks it’ll take about $9 million to get fully up and running. As he crowdfunds, invests his own money and starts infusing — he said the state hasn’t held up its end of the deal.
And so he waits.
Alex Degman is an Illinois statehouse reporter for WBEZ. Follow him @Alex_Degman.
Mary Dixon: Three years after recreational cannabis became legal in Illinois, many of the state's "craft growers" are still facing significant obstacles. So far out of 88 licenses issued, only one facility is opened and only one secured a loan through a state program set up specifically for marijuana businesses. Time is running out. The deadline for these businesses to be ready to go is March 1st. WBEZ's Alex Degman has the story.
Alex Degman: Think of the term craft cannabis like craft beer. Verano and Cresco – two of the big guys – have operated in Illinois since the state’s pilot medical program. They’d be the Miller and Budweiser of the cannabis industry. They got in when major companies were allowed to start cultivation centers as large as 210,000 square feet. And they were ready to go when recreational use was legalized. You can find their products in a lot of dispensaries around the state. But the state’s recreational marijuana program also makes room for smaller players – like Reese Xavier, the CEO and managing partner of “HT23.” Xavier’s company is taking over a bunch of space at a former strip mall.
Reese Xavier: This was ACE Hardware, this was a Restore shop, I want to say a Habitat for Humanity Restore, or Resale. There was a Liberty Tax, and then a boxing gym.
Alex Degman: We're at the corner of a busy intersection in south suburban Chicago Heights. There's a Burger King in the middle of the old mall's parking lot and the site sits across the street from another strip center full of restaurants, a grocery store and retail.
Reese Xavier: So... from that corner all the way down to the tree line, all the way - all the way back down to the tree line down there...
Alex Degman: Xavier didn't think about entering the cannabis industry until a few years ago. That's when he researched some of the drugs medical benefits and he was impressed by the state's plan to reinvest some marijuana revenue into communities that were disproportionately impacted by past drug enforcement policies. He also says cannabis as an economic catalyst.
Reese Xavier: I thought if I could find a company that could be rooted in the community, that could provide economic opportunity, maybe that would change things around. And I thought cannabis could be the tool to make that happen.
Alex Degman: The state had people like Xavier, whose African-American, in mind when issuing 88 conditional craft grow licenses. All of them were issued to companies meeting social equity criteria. That means most of the company's ownership has either lived in a disadvantaged area the majority of the last 10 years or been convicted of cannabis offense, or hires the majority of their workers from a disadvantaged area. Disadvantaged here refers to an area that's been significantly affected by past drug enforcement and it's used here as a proxy for race. The idea was to create a lower barrier of entry for people who don't have access to as much capital, but there's a major problem. Xavier can't attract investors in part because of state regulations.
Reese Xavier: One of the main questions they asked, well, how much can you grow?
Alex Degman: Remember how the big companies can grow in 210,000 square feet? Well, craft growers only get 5,000.
Reese Xavier: We have to start - well 5,000 square feet. And as I quickly try to say, well we can go up to 14 they said, well wait a minute. What are the, what are the big folks doing? Uhh, well they have 210,000 square feet - and that's almost a stop sign. Like, woah!
Alex Degman: Other craft growers are in similar situations, they're facing delays and problems getting financing or outside investments. Even if they are allowed to use 14,000 square feet initially, there's no guarantee that they'll have the start up capital to do it. And there's no guarantee investors will come back. To help with financing the Illinois Department of Commerce and Economic Opportunity, or DCEO, started a loan program for social equity cannabis businesses with two financial institutions. Craft growers are eligible for up to a million dollars, half of that from the state, the other half from either Good Tree Capital or Credit Union One. Xavier was turned down by Credit Union One. They didn't tell him why, and they didn't respond to me when I asked. But he has an idea.
Reese Xavier: I would imagine that the lending institution has to evaluate, you know, and a start up company, social equity applicants, no cashflow. Oftentimes, you know, we're not millionaires.
Alex Degman: Although he hasn't been approved for anything yet, Xavier says he is working with Good Tree Capital. They also didn't respond to questions. Growers and other cannabis businesses that have already been granted a license can still apply for a loan. But DCEO spokeswoman Emily Bolton in an email acknowledged the quote "certain level of uncertainty that came with the new program based on a still federally illegal substance." That led to the launch of the new direct Forgivable Loan program in November. Bolton says DCEO is exploring other options for future lending program opportunities, but will it be too late for this cohort of craft growers?
Lisbeth Vargas Jaimes: I'm not naive to the uphill challenges that any small business faces, but I really do believe at this point that we're being set up to fail.
Alex Degman: That’s Lisbeth Vargas Jaimes, the executive director of the Illinois Independent Craft Growers Association. She says only one craft grow operation has opened so far in Illinois. And even though DCEO says several more are close to getting approved for financing, everyone with a conditional license has to be ready to operate by March 1st.
Lisbeth Vargas Jaimes: Really, realistically, our fear is March 1st is gonna come around the corner and and people who weren't able to be operational, or leading up to that, are going to be forced to either buckle, lose their license, or sell.
Alex Degman: The Illinois Department of Agriculture, which oversees craft grow licenses, says that deadline has already been extended multiple times. Officials didn’t say if they plan to extend it again. Advocates also want legislative fixes, but it's hard to pass things related to cannabis. Democratic State Senator Cristina Castro of Elgin sponsored the bill that craft growers have long wanted – increasing the amount of grow space they can immediately use. But it languished for almost a year, didn't go anywhere and now it's too late. That legislative session ended, so now Castro has to start over.
Cristina Castro: My commitment is to continue working on this. I know there are other things that, you know, industry and also craft growers are looking into. So maybe it can become, like, part of a small package.
Alex Degman: In the meantime, Reese Xavier with HT23 continues seeking loans. While he waits he’s pushing the business forward with his infuser license. He plans to make things like gummies and vape cartridges to get products into stores as quickly as possible.
Reese Xavier: We’re trying to, you know, scale back our need to the bare minimum. Break it up into phases, become operational, generate some money and then be able to move forward on a second phase.
Alex Degman: Xavier says starting up the kitchen will cost about 2 million dollars, but it’ll take around 9 million for HT23 to fully build out. Xavier said he is pretty confident that his company will be up and running in the next six months. And as he crowdfunds, invests his own money and starts infusing… he says the state hasn’t held up its end of the deal. And so he waits. Alex Degman, WBEZ News.
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