One of the most important steps in your business plan will be finding cannabis business banking. You are likely already aware of how difficult it can be in a newly legal state to find a bank willing to do business with your dispensary. Regardless of the fact that it is legal in your state, banks are still hesitant.
The importance of cannabis business banking
There’s no question that securing banking for your business is a must, as with most businesses. You need a bank for:
- Paying bills
- Paying your taxes (remitting excise, sales, and income taxes)
- Holding cash (keeping cash at your retail store is not a good idea)
If you are in an established state, you will likely be able to find a bank or credit union willing to work with you. However, when we started Cannabis Central in Washington, this was not the case.
Why banks are hesitant to work with cannabis businesses
Because banks are federally regulated, they must follow federal laws. Because cannabis is still federally illegal, it is therefore illegal for banks to do business with you.
Despite what state laws say, banks run a huge risk by conducting business with companies in this industry.
The FDIC regulates them, and federal regulators check in on them every 30-36 months. They stand to lose a lot by holding your money or giving you loans, so level with them.
Recent news in cannabis business banking
Fortunately, things are trending in the right direction. In fact, according to MJ Biz Daily, the California Senate recently voted to allow banks and credit unions to accept marijuana retailer deposits.
This will make it easier for cannabis retailers to pay their taxes. According to Senator Bob Hertzberg, the writer of the bill, this is as close as we can get until the federal government changes its policy on cannabis banking. More importantly, though, the SAFE Banking Act recently passed in the House of Reps.
This measure would grant protection to bankers working with cannabis businesses. It allows dispensaries to do thinks as simple as open an account and store cash, something that is not a guarantee these days.
Under the SAFE banking act, prosecutors cannot go after banks for their involvement in the cannabis industry. This bill also has huge social and safety implications. It makes it so retail cannabis stores don’t need to hold large amounts of cash at their location anymore. Cash-based dispensaries are at a higher risk of cash-based crimes (duh).
Our experience with cannabis business banking
When cannabis first became legal in Washington state, we struggled to find a bank willing to work with us. You can expect the same in your state, as it really does take a while before banks are comfortable working with businesses in this industry.
It takes one courageous banker to come forward and be willing to work with a dispensary or cannabis business. Until that happens, you will have to be creative.
Now, there are several banks in the state that are not only willing to conduct business with retail cannabis stores, but they are also open about it!
We have worked with a credit union out of Seattle called Salal, and they have been spectacular. They completely handle all of our banking needs and were instrumental in creating a more open banking system for cannabis businesses in Washington state.
If you are in a state relatively new to legal cannabis, such as Missouri, Oklahoma, etc, you likely won’t have the luxury of working with a company like Salal at first. However, there are some things you can do.
How to get banking for your cannabis business
If you have unsuccessfully attempted to secure banking for your retail cannabis business, don’t worry -- you still have some options.
One of the best ways to get banking for your cannabis business is to set up a holding company. This will be a business that your retail cannabis store operates under. This holding company can secure banking, and banks can bypass direct work with your cannabis business. Its a win-win for both parties.
Banks are going to demand a ton of information out of you, to further mitigate any risk they assume by working with you. The bank and federal government communicate heavily regarding your banking records, essentially checking each others records against their own.
We encourage you to be aggressive in pursuing banking for your cannabis business, and actively engaging discussions with legislatures regarding banking.
It is important we all do our part in progressing towards an open banking system in the cannabis industry. After all, all it takes is a few banks willing to work with you! If you aren’t sure what to say to banks or investors, or still aren’t exactly sure where to start, let’s chat. When starting Cannabis Consulting Nationwide, I knew others would run into the same issues with finance and taxation that I did. So, I can help! You can ask me any questions you want right here.