Read This Before Opening a Bank Account for Your Cannabis Business
By: Annie Kiely
Cannabis businesses operate in a precarious legal state in terms of their banking, and this has been the case for years - even for legal and medical marijuana operations.
As legalization expands and cannabis businesses have begun to generate serious income, the need for banking services for this industry has become more and more apparent. While the legal issues remain, many more financial institutions have started to offer services to legal marijuana-based businesses, providing they meet certain parameters.
After all, there is serious money to be made for banks as well.
If your cannabiz is growing, you may be eager to open a business bank account. Opening an account isn't necessarily impossible, and many businesses operating within states that have legalized have successfully started accounts and relationships with a bank or credit union.
That said, it's estimated 70% of cannabis businesses still do not have a bank account.
Clearly, legal risks remain. You should be very careful in deciding when and how to trust your hard-earned money to any bank.
Here are a few key points to consider before trying to open a bank account for your cannabis business.
Navigating Legal limbo
As states change laws to keep up with changing attitudes toward cannabis, it still remains classified as a Schedule 1 Narcotic according to Federal law in the United States. As a result, banks have been unable to provide services for even legalized businesses, who have tended to operate on a cash basis in many cases.
This makes for a dangerous situation for employees, and is of course, not a very secure way to handle money.
Banks operating within legalized states have, in some cases, created policies that allow them to accept business from cannabis-based businesses. Often, opening an account requires proving that you are operating legally, that you provide ample employee training, that you are licensed and insured, and that you have plans in place to ensure ongoing compliance.
Banks are legally obligated to report your business and your account if they suspect illegal activity. This investigation will cost you time and money, even if you are operating legally, so a risk of business interruption does still exist.
Personal accounts won’t cut it
If you’ve got a small side-business going, chances are you may have been using your personal bank account to deal with your business cash.
But, if you’re planning to expand, or are flowing a lot of money in and out, beware.
Any of your personal activities are under as much scrutiny as a business account, and a bank is as likely to report you as an individual as they are a business if they suspect illegal activity.
Leverage Local Opportunities
Big banks have little incentive to take on a risky business. After all, they are well supported, and often have enough clients to keep them afloat.
Any breach to the law or to their internal policies can have huge costs. Therefore, often it is easier to deny risky clients. The cost of doing business with a cannabis business owner may appear to be too high.
The solution may be to seek out a local credit union or banking organization. These smaller businesses are more willing and more capable to take on your business, and often have the staffing ability to personally assess your business, deem that it is legal, and do what needs to be done to maintain a banking relationship with you. In smaller organizations, decision-makers are usually on-site and more accessible, less bound by company policy, and excited to support new local ventures.
If your local banking institution is willing to work with you, be ready for some hefty paperwork! But once you’ve made it through the hoops, you’ll be set up with the legitimacy of a bank account.
monitor industry trends
If you have a bank account for your cannabis business, or are thinking of opening one, monitor industry and federal trends regularly. This industry is moving quickly. You need to be aware of what is going on.
Opening and keeping a cannabis business bank account is still risky. In fact, it's not uncommon for a cannabis business's account to be shut down without warning.
With the current trend toward legalization, banks have slowly started to open up to cannabis businesses. That said, you would be wise to keep a careful eye on all laws and regulations.
If your business requires a bank account for billing, payroll, and cash flow, there are options available. However, do your research and proceed with caution to make sure your hard earned cash is safe.
Once you’ve got a financial institution to work with, continue to monitor industry trends. In addition, aim to reevaluate your banking situation a minimum of every three months.
Truth be told, you should be reviewing your accounts monthly. Even if your business is operating legally, staying on top of these trends can save you from having to prove that your operation is completely legal, and keep business moving forward.
What has been your biggest banking challenge? Share your perspective below.
AUTHOR: ANNIE KIELY
Annie Kiely is a freelance writer, editor and researcher who lives in the 'burbs of Toronto with her partner and too many pets. Annie is an advocate for wellness, mental health support and literacy, and spent many years working in the charitable sector. In the past few years, she has built a successful freelance business conducting research and writing services for cannabis businesses all over the world.