Banking challenges for the cannabis industry
Banking in cannabis is one of the biggest hurdles to jump over. It is a big enough hurdle that companies are still unable to get an account at many banks. Cash from canna-businesses is frowned upon due to the federal classification of this crop. Of course, canna-businesses are expanding, and with that comes more information and acceptance of our industry.
The Issue
If banks desire to work with your business, they must consider the potential federal ramifications. Banks tend to force higher minimum balances and strict application requirements to ensure safety in this predicament, which makes banking challenging for most small- and medium-sized businesses.
Banks have to follow specific federal policies. One such approach, The Federal Criminal Law Enforcement Policy, was created to monitor the 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 essential to acknowledge the defensive side of cannabis banking.
At the same time, canna-businesses are likely to then deal in cash which brings more concerns. Cash businesses have an increased risk of robbery and challenges to render payments to their employees or vendors. Banking is a fundamental piece of business functions and should be able to have access to this fundamental resource.
Future Solutions
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 offers protecting financial institutions and businesses like yours by giving you access to typical economic structures.
There have been discussions for years promoting state-level banking alternatives for canna-businesses; 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 to apply to small- and medium-sized businesses.
The Full Cycle CFO Difference
Why Choose Our Team For Your Cannabusiness?
If banks allow canna-businesses 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 accounts and has picked up some information.
We can share this information with you and assist in all the underwriting requirements for your specific bank. From our expertise, this often requires up-to-date financials and accurate record keeping.