Another sign of change from the Carter to the Reagan approach? The Small Business Administration has apparently been awakened to the fact that "headshops" sell items that are used with illegal drugs, and funding those types of businesses "may appear to condone or support such activities," according to the Feb. 17 Federal Register (page 12500).
SBA now is proposing to stop giving financial assistance to them or any other borrower that "produces, services or distributes any product or service used in an illegal activity."
What you may not realize is that up to now, SBA's own regulations permitted borrowers to be involved in producing or distributing "paraphernalia that has no purpose, except for controlled substance [drug] use," provided ti supplied less than "30 percent of [the borrower's] annual gross income."
Something more than just a federal agency being associated with the drug trade is involved. SBA officials see it as plain good business to get out of financing these kinds of borrowers.
It seems that more and more local jurisdictions -- including several around Washington -- are passing laws and ordinances prohibiting any sales of drug-related items, such as rolling paper, various types of pipes, cocaine spoons and the like, which are directly associated with the use of prohibited drugs.
The SBA bureaucratci logic is that if those sales are illegal, the agency "no longer has reasonable assurance that a concern dealing in such items can repay a long-term loan." Thus such borrowers should be ineligible in the first place.