Licensed Brands and Access to Banking

With cannabis still federally classified as an illegal Schedule 1 drug, many institutions are currently unable to provide banking services to those working in the cannabis business. However, this doesn’t mean these businesses are out of luck.

Although cannabis is still considered federally illegal, the federal government is still able to help those in the cannabis industry with access to banking in other ways.

Why is banking important for cannabis businesses?

The importance of banking for the cannabis industry boils down to one thing: It's more efficient than just using cash.

Most notably, it’s easier to bank electronically than wasting time and labor costs counting, logging, packaging, and storing cash.

While banking is easier and more efficient, it’s also safer.

When dispensaries have large amounts of cash on-site, this can leave these businesses open to significant risks. One of the biggest risks they face is the possibility of theft. Because of this, dispensaries end up spending more money on security costs to protect their money and other valuable assets.

This risk also applies to these dispensaries’ employees and their facilities. Without having access to banking, cannabis businesses put their employees in danger that could otherwise be avoided.

While cash is mainly stored on-site, it’s also exposed to risk when being transported in large quantities. If these dispensaries had access to banking, they’d be saving money that must otherwise be spent on expensive security systems, guards, and strong transport security.

Banking also makes it quicker for licensed cannabis brands to pay and be paid. This creates more operational efficiency, saving time and allowing for increased organization of a dispensary’s assets, which is important for tax and legal reasons.

With access to banking, licensed brands can accept noncash payments as well, allowing for more sales to customers who don’t carry cash. This encourages a business to expand towards other consumers as well as making it more accessible to the general public.

Banking also offers the advantage of providing dispensaries with a more accurate estimate of how much their business makes. Banking makes running a business easier and more efficient, putting resources like energy and money to better use towards utility bills, suppliers, and further expansion.

Giving licensed brands increased access to banking will help not just the cannabis industry but the Internal Revenue Service as well when it comes to collecting taxes from these businesses.

Since the cannabis industry is a quickly growing and profitable market, allowing these businesses more access to banking would be in the government's best interests.

What banks serve the cannabis industry?

Unfortunately, as of right now, no major banking systems will work with any cannabis businesses.

However, this doesn't mean all is lost. Smaller institutions like community banks and credit unions will be easier for those in the cannabis industry to make an account with.

Looking for these smaller institutions will prove to be a bit more difficult, though, especially since most banks don't publicly express that they work with those in the cannabis industry.

Although it may be more difficult to find an institution to bank with based on such a limited selection, it may be as simple as asking other dispensaries in your area who they bank with. Cannabis businesses can share advice and expertise with each other on how to best approach banking in this industry.

For these licensed brands, it's also best to work with financial institutions that have prior experience working with those in the cannabis industry and not with banks that are new to the industry.

Unlike normal banking, though, licensed brands will have to fill out more paperwork and be expected to show strict compliance.

This could also mean additional fees from these smaller institutions to help with the added workload required to work effectively with cannabis businesses.

How can a cannabis business open a bank account?

Once a licensed brand has determined a list of banks they want to work with, they should rank them in order of who they would like to work with the most to the least.

From there, they should contact these banks and be upfront about their business working with cannabis.

Before opening an account, it's important to read the fine print to see if there are any limits or restrictions that apply. Some banks may limit how much a cannabis business can hold or deposit, which can be a disadvantage.

Assessing the fees associated with working with different banks is also important before choosing one specific institution. These fees can range from having access to online banking to payroll.

Finding the best bank to work with is vital for a licensed brand. Instead of jumping the gun on whatever is first available, take the time to assess each institution and find the best fit. While there is a very limited selection of smaller institutions to bank with, it's important to review all of your options.

Opening an account is slightly more difficult than opening a normal bank account, mainly because of the additional time and paperwork required.

The public benefits of licensed brands having greater access to banking are clear, and the benefits plainly outweigh the risks and disadvantages associated with operating solely in cash.