Many people in the legal bud business have got a case of the “banking blues”. Although many savvy investors and entrepreneurs recognize how lucrative the weed industry is, big banks still aren’t comfortable working with licensed dispensaries.
It’s unlikely this situation will change significantly until cannabis laws relax at the federal level. Without something like the SAFE Banking Act, national banks won’t want to get involved with a technically illegal business.
Options For Legal Banking In The Current Cannabis Industry
Although options are limited for dispensary owners, there are a few ways legal weed retailers could get access to vital financial services. It may not be possible to work with a national bank at this time, but cannabis businesses should know there are other ways they could safely manage their funds.
Consider Reaching Out To Local Banks & Credit Unions
Cannabis businesses can’t expect help from the big national banks. Since most of these banks are covered by FDIC, they must actively avoid marijuana businesses at this time.
Remember that FDIC-protected banks answer to the federal government, so they must abide by the current laws in DC. Marijuana remains a controlled substance under the DEA, so these banks would be disobeying Congress if they started opening accounts for cannabis businesses.
You could, however, focus on small, local banks or credit unions. Often, if these financial providers aren’t FDIC-insured, they could take on more risks in emerging industries like cannabis.
Indeed, hundreds of credit unions are helping those involved in the hemp or legal marijuana industry. However, you often won’t see these businesses putting up billboards promoting this service. Even smaller credit unions like to keep their cannabis operations under wraps.
To find out which banks work with cannabis retailers, you should do a Google search of credit unions in your area and call as many branches as you can find. Be sure to ask about special documentation requirements and fees the bank will need to open a business account. Also, please remember you may not get the protections associated with a major financial institution (i.e., FDIC).
It helps to get on a first-name basis with a local branch, especially when dealing in the cannabis industry. Bankers always over-scrutinize cannabis clients, so expect to overdeliver with compliance-related materials. The more professional you conduct yourself, the easier credit unions will feel taking on a risk with your cannabis business.
Is Fintech The Future Of Cannabis Banking?
Luckily for cannabis businesses, there has been a growing trend towards the “digitization of the dollar.” Specifically, financial technology (aka fintech) has become a powerful force that gives the underbanked easier access to quasi-banking services.
However, that doesn’t mean integrating with fintech is an easy “workaround” for cannabis businesses. Unfortunately, large fintech companies like PayPal have been known to shut down accounts once they learn their customers are dealing with hemp or marijuana.
While it may be challenging to use blue-chip fintech platforms, companies like Abaca Bank believe cannabis-focused fintech could help solve many of the financial issues dispensaries face. In an interview with The Wall Street Journal, Abaca Bank’s CEO Dan Roda suggested cannabis businesses could capitalize on the innovations in cloud technology and how digital dollars move—provided they work with a fintech provider that knows the ins and outs of cannabis law.
Major fintech platforms may still be wary of dealing with cannabis. However, cannabis-focused companies like Abaca Bank have shown it’s possible to use fintech to provide more options to dispensary owners.
Is A “Bitcoin Bank” Viable For Cannabis Businesses?
It’s no secret that many cannabis fans are also crypto “holders.” Since dispensaries are shut out from traditional finance, many cannapreneurs have taken on the risk of managing their funds on the blockchain. But is the “Bitcoin Standard” a safe and effective choice for cannapreneurs?
Unfortunately, there’s no easy answer to using cryptocurrency as an alternative to a standard bank account. Like cannabis, each state has a different set of laws regulating the crypto space. There are also fears that federal regulators could soon target many aspects of this emerging industry—especially stablecoins.
Since stablecoins are pegged 1:1 to the US dollar, they are the least volatile cryptos for cannabis owners to store and accept. However, if central governments continue to push for centralized digital dollars, it may put a cannapreneur’s hard-earned USDC at risk.
Beyond legality concerns, there are unique challenges associated with storing, accepting, and tracking cryptocurrencies. If cannabis businesses want to include crypto as a part of their savings strategy, they should invest in high-quality hardware wallets to minimize the risk of a hack. Crypto-friendly cannabis owners also have to factor in the extra taxes they will pay on their business operations if they swap digital assets.
While cryptos like Bitcoin, Ethereum, and USDC may offer greater flexibility, they also have a unique set of challenges. Anyone who wants to use cryptocurrencies in their business model should speak with legal and tax professionals in their state. Get a good feel for what your hometown allows so you won’t face any surprises down the line.
Whatever “Bank” You Choose, Cannapreneus Need Loads Of Documents
It doesn’t matter what alternative banking option you choose—cannabis businesses always need extra documentation. From your licenses to your inventory checklist, potential banking partners will need to triple-verify that your business is in tip-top shape before they decide to work with you.
Before you start worrying about opening a bank account, you need a solid strategy to organize all of your most essential data points. Often, people involved in cannabis recommend using a POS designed for the legal weed industry. You may also want to contact specialists like White Eagle Coalition that work in cannabis and CBD compliance.
The more organized you feel before seeking approval from a financial institution, the greater your chance of success in this industry.
Abaca: The Best Cloud-Based Banking Solution For Weed Businesses
Wherever you work in the cannabis supply chain, Abaca could help you enjoy the financial freedom of having a checking account. Abaca’s cannabis-focused, cloud-based platform provides customers with a simple and cost-effective strategy for managing money without dealing with the legal hassles that plague this industry.
Abaca’s clients enjoy access to FDIC-insured bank accounts as well as constant electronic recording. Cannabis retailers, cultivators, and manufacturers could also use Abaca’s lending platform or convenient “AbacaPay” for in-store payments.
For more details on how Abaca could solve your cannabis banking issues, contact Abaca via the White Eagle Coalition.