Banking in cannabis is one of the biggest hurdles to jump over. In fact, it is a big enough hurdle that companies are still unable to get an account at many banks. Cash from cannabusinesses is frowned upon due to the federal classification of this crop. Of course, cannabusinesses are expanding and with that comes more information and acceptance of our industry.
If banks have the desire to work with your business, then they must consider the potential federal ramifications. To ensure safety in this predicament, banks tend to force higher minimum balances and strict application requirements which makes banking tough for most small- and medium-sized businesses.
Banks have to follow specific federal policies. One such policy, The Federal Criminal Law Enforcement Policy, was created in part to monitor potential money laundering of cash-rich businesses. This applies to our industry as they have focused on state-legal marijuana businesses covering for other illegal drug cash transactions. Of course, this doesn’t apply to your state-legal business, but it is also important to acknowledge the defensive side of cannabis banking.
At the same time, cannabusinesses are likely to then deal in cash which brings more concerns. Cash businesses have an increased risk of robbery and increased challenges to render payments to their employees or vendors. Banking is a fundamental piece to business functions and should be able to have access to this basic resource.
The House of Representatives voted yes on the SAFE Banking Act! This is a huge win for cannabis; however, the fight isn’t over yet. The next step to this proposed banking act is for it to be approved by the Senate. Currently the SAFE Banking Act proposes protecting financial institutions and businesses like yours by giving you access to typical financial structures.
There have been discussions for years promoting state-level banking alternatives for cannabusinesses; however, the challenge here is that the state would need to be able to support a large (and quickly growing) industry. Additionally, more financial institutions will need to lower their application milestones for this to apply to small- and medium-sized businesses.
If banks will allow cannabusinesses to open an account, then it can take months to set up with all the hoops to jump through. Full Cycle CFO has worked with banks and credit unions to open cannabusiness accounts and have picked up some information along the way. We can share this information with you and can assist in all the underwriting requirements for your specific bank. From our experience this often requires up-to-date financials and accurate record keeping.