Cannabis industry growth is set for exponential expansion, and banks are taking note. When lending money to cannabis businesses, more stringent policies, monitoring procedures, and due diligence procedures will need to be established and upheld.
Change will also necessitate shifting away from cash-only operations and towards open banking systems. While there may be temporary relief with workarounds available to business owners, in the long run this will come at an increased cost to their bottom line.
1. Know Your Customer
Cannabis-related businesses (CRBs) need access to an array of cash management services, such as online business banking, ACH origination, wires and debit card services. Credit unions are increasingly meeting this need by offering standalone or combined commercial offerings alongside their services.
However, due to federal illegality and fluctuating regulations surrounding CRBs, accessing centralized banking systems has proven challenging, forcing many CRBs to operate as cash-only businesses which increases security risks while forcing employees to handle large sums of cash on a regular basis.
At the same time, this prohibits states and localities from collecting taxes, license fees and other revenue generated from CRBs; employees without an easy way to pay their bills are left vulnerable without a safe way to manage their bills. That’s why the SAFER Act, which would provide community banks that serve CRBs a safe harbor to protect themselves is so vitally important.
2. Know Your Transactions
Cannabis businesses must secure a banking account as soon as they open. Unfortunately, major banks remain reluctant to open accounts for those involved with growing, producing, selling, distributing or otherwise dealing in marijuana and hemp – leaving thousands of companies unable to take advantage of basic banking services like depositing funds, paying bills or lending money.
Even after being rescheduled, cannabis companies can expect it to take years before they have secured long-term banking relationships that meet their needs. But as the landscape shifts and banks adapt accordingly, some are taking measures to be more accommodating.
One way to speed up the process is to have all your paperwork ready – this includes background checks, weed licenses and transactional data that needs to be presented for regulatory filing purposes. Confia can help financial institutions automate this process and support client compliance while improving member experiences while offering cost-efficient alternatives to creating programs themselves.
3. Know Your Bank
As marijuana businesses seek a comprehensive selection of banking services – including ACH origination, wires, credit cards and lending – they expect their chosen financial institution to deliver. But developing an effective cannabis program requires considerable expertise.
Cannabis presents unique challenges that must be managed, making the assistance of experts able to devise strategic plans to manage risks and build a robust future imperative.
At an historic committee vote, the Senate Banking Committee passed a federal bill that will grant state-licensed and regulated marijuana businesses access to traditional banking services through what’s known as the SAFER Banking Act. Banks will no longer fear legal repercussions for working with these types of businesses and it paves the way for an explosion of opportunity in U.S. marijuana markets; although, until it takes full effect it’s likely we’ll continue seeing transactions conducted with bulletproof cars and ex-military guards for transactions conducted transactions between state entities and banks and banks and established in terms of banking arrangements between companies and traditional financial institutions.
4. Know Your Options
Though national banks remain reluctant to work with cannabis businesses, there are plenty of local and regional options that offer banking solutions such as point-of-sale systems and seed-to-sale tracking systems which help verify transactions and sales.
These systems can help dispel stigma around cannabis businesses and create an industry with more diversity and inclusivity. Many even offer banking solutions like cash management and lending services.
To open a bank account for your cannabis business, it’s essential that you’re ready to answer many questions and submit several documents. Preparing these beforehand will speed up the application process significantly.
To help navigate the complexities of cannabis banking, consult with a company that can assist in all your financial needs. They can assist in finding local or national banks willing to work with your business as well as finding payment processing and banking vendors suited specifically for cannabis businesses like Green Check Verified’s team who are always here to provide expert assistance when finding solutions that suit.