Cannabis companies need access to financial services to succeed. It is impossible to run a business without them. The cannabis industry in the United States is exploding in popularity. With more states legalizing cannabis for both medical and recreational purposes, the industry is projected to grow exponentially over the next decade. In fact, in 2020 alone, legal sales across the US hit a record of $17.5 billion – a 46% increase from 2019.
Unfortunately, federal prohibition is stopping major financial institutions from serving these companies. Hence, this has created significant barriers for the cannabis industry, making it difficult for businesses to operate and grow.
So, this raises the question — How do cannabis companies bank?
This article will explore the various options available to these businesses looking to bank. We’ll look at the difficulties associated with financing their company and why it’s so hard to find a bank that will work with these businesses. We’ll also examine the alternative options available to these businesses and the new legislation that may open the doors to the industry.
The federal prohibition of cannabis makes banking extremely difficult for cannabis businesses, especially if you’re on a budget. Nationwide, banks are subject to federal laws, including the Bank Secrecy Act (BSA), which requires financial institutions to report any suspicious activities to the authorities.
Because cannabis is still considered illegal under federal law, banks that serve the cannabis industry are at risk of violating this act. In turn, this puts them at risk of facing federal prosecution, penalties, or even the loss of their banking license.
Furthermore, most financial institutions, such as banks and credit unions, operate under the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), which are federally regulated. These regulators consider cannabis a high-risk business, imposing strict compliance standards on banks serving cannabis companies.
Therefore, this results in higher costs, burdensome paperwork, and a greater risk of audits, making it difficult for banks to justify serving these enterprises. As a result, the majority of financial institutions cannot service them, forcing them to look for alternative banking solutions.
Despite the challenges of traditional banking, these businesses have found other ways to access financial services. Here are some of the most popular options:
Some of these companies have attempted to hide their true nature from traditional banks in order to open a bank account. For example, they might register their business as a health and wellness or consulting firm rather than a cannabis company. While this method can work in the short term, it is not a long-term solution. Eventually, the bank will likely discover the true nature of the business and shut down the account. You also risk prosecution for fraud — a highly undesirable outcome.
Some cannabis organizations have turned to unscrupulous lenders or offshore banks willing to work with high-risk businesses. However, these institutions often charge exorbitant fees and may engage in illegal or unethical practices. Working with these types of institutions can put them at risk of legal or financial trouble.
A third option is to work with cannabis-friendly banks like Safe Harbor Financial. These banks specialize in working with such companies and understand the unique challenges they face. They offer a range of financial services, including checking and savings accounts, loans, and merchant services. While this type of bank is still relatively new, they are quickly becoming a popular option for companies in the industry.
Cannabis businesses have been lobbying for years to change federal banking laws. One bill that has gained significant support is the Secure and Fair Enforcement (SAFE) Banking Act, known colloquially as the cannabis banking bill. This legislation would allow banks to work with cannabis organizations without fear of federal prosecution. The bill was first introduced in 2013 and has been reintroduced in every Congress since, but it has yet to pass into law.
If this bill were to pass, it would be a game-changer for the cannabis industry. It would help bring the cannabis industry out of the shadows and into the mainstream. It would allow cannabis companies to access traditional banking services like checking and savings accounts, credit lines, and business loans. Lastly, it would also make it easier for them to accept credit and debit card payments — a huge win for the industry. Additionally,
While the SAFE Banking Act has yet to pass, it has gained significant support in recent years. In 2021, the bill was included in the National Defense Authorization Act, a must-pass piece of legislation that funds the military. While the provision was ultimately removed from the bill’s final version, it shows that there is growing bipartisan support for the bill. The SAFE Banking Act will likely be reintroduced in the next Congress, and many in the industry are optimistic that it will finally become law.
The banking issues facing the cannabis industry are complex and challenging. Federal prohibition and regulatory barriers have left many American cannabis companies without access to basic financial services. However, despite these challenges, alternative banking solutions are available to help cannabis businesses manage their finances and grow their operations.
As the cannabis industry continues to grow, access to reliable banking services will be essential to success. The passage of the SAFE Banking Act will provide a much-needed boost to the industry and allow for more financial institutions to serve the industry. In the meantime, cannabis companies need to turn to alternative banking solutions, such as Safe Harbor Financial, to ensure their businesses can operate and grow.
Safe Harbor Financial is a pioneering cannabis bank. Our expertise and commitment to the cannabis industry have made us the go-to solution for cannabis organizations seeking a reliable banking partner. Safe Harbor Financial has years of experience serving cannabis businesses and can help companies navigate the complicated world of banking.
Contact us today and take control of your company’s financial future.
Do you own a hemp, CBD, dispensary, marijuana, or cannabis business and need a business bank account? We’ve validated over $8 billion dollars in cannabis-related funds since 2015. Bank with confidence. Bank with Safe Harbor Financial today.Open Your Account