8 Documents You Need To Get Cannabis Banking

It can be challenging enough to find banking — not having the right documents in place shouldn’t complicate the process. The best way to ensure fast approval is to have detailed and organized documentation at the ready. Nearly every financial institution will ask for these eight documents before approving your account.

1. Capitalization Table

A capitalization table is a list of your company’s owners and their percentage of ownership. Financial institutions are required by law to identify “beneficial ownership percentage,” where they gather certain details about each individual owner who has 25% or more ownership in your company. Some banks have much more stringent requirements for beneficial ownership percentage disclosure, so you may see as small as 10% ownership stake as a requirement for reporting. This requirement is designed to support anti-money laundering (AML) efforts through a process called “know your customer” (KYC).

2. Certification of EIN/TIN or Tax Return

All businesses, including cannabis companies, must register with the legal tax authority in their jurisdictions at the local, state, and federal levels. Banks require businesses to submit a letter from the Internal Revenue Service (IRS) known as a Certification of Employer Identification Number/Tax Identification Number (EIN/TIN) to demonstrate compliance with all applicable tax laws. A tax return may also be suitable, depending on your chosen financial institution’s rules.

3. Cannabis Licenses

Plant-touching cannabis businesses must provide their licenses when applying for a bank account, because a bank or credit union needs to verify that your business is indeed a legal one. If you’re an ancillary business, you can skip this step.

4. Operating Agreement or Company Bylaws

The financial institution will need a copy of your business’s operating agreement or bylaws. Which type of document your business needs will depend on your corporate structure. Typically, LLCs have operating agreements, while incorporated entities like S Corps and C Corps have bylaws.

5. Property Title or Lease

The property title or lease establishes the physical location of your business. Financial institutions need this to confirm the existence of your company headquarters, send any required documents via mail, and to provide any courier services that may be required for the transfer of cash payments.

6. Secretary of State Filing or Certificate of Good Standing

The Secretary of State filing, also called a Certificate of Good Standing, shows your business is legally established where it claims to operate. It provides financial institutions with another way to confirm that your business is fully compliant with state law.

7. Certificate of Insurance

A Certificate of Insurance shows that a business carries all minimally required insurance coverage. Some financial institutions may require it as part of the application, so it’s a good idea to have it handy.

8. Master Services Agreement

If you’re engaging a third-party for services that manage your business operations, you may have a master services agreement that outlines the scope of your relationship and expectations. The financial institution may also require a copy of the master services agreement to better understand these relationships if they are central to the success of your business. This document is likely optional.

Why Do Financial Institutions Need These Documents?

Financial institutions that work with the cannabis industry are required to adhere to strict due diligence requirements set out by the Financial Crimes Enforcement Network (FinCEN). These guidelines are designed to protect the financial system from fraud and money laundering. Part of that responsibility is knowing the ins and outs of their clients’ businesses and demonstrating that they have reviewed and approved all transactions.

To that end, banks and credit unions need a lot of documentation before they can even open your account. Providing these documents in a complete, organized fashion will help a bank process your application quickly and easily, so you can get back to doing business.

What Documents Are Necessary To Apply For Cannabis Financing?

While the above eight are the most important documents you need to access any financial product, you’ll need to go a step further if you want to obtain funding, such as a loan or a line of credit. Have this information at the ready if you plan to apply for financing:

• Balance sheets
• Income statements
• Past tax returns, if available

How Else Should You Prepare To Apply For A Bank Account?

There are a few additional things you can do to expedite the onboarding process when signing up for cannabis banking services. Keep the following in mind when filling out your application:

• Be transparent: It’s important to be completely honest. If a bank rejects you because you’re involved in the cannabis industry, they weren’t the right partner for you anyway. If the financial institution learns you fudged part of your application, you could lose your account and have to start the process all over again.

Green Check Connect offers a marketplace of cannabis-friendly financial institutions who want to work with cannabis companies, and being completely transparent with them will only make your onboarding process smoother.

• Prepare for sales verification: Banks will need to monitor your ongoing financial activity once you’re onboarded. Financial institutions are required to demonstrate that every dollar you earn is from a legal sale. Be prepared with data from your point-of-sale system and seed-to-sale tracking system. Understanding how software works together and how you can deliver reports efficiently can help speed up this reporting process.
• Choose cannabis-friendly institutions: Working with a bank that knows your cannabis and supports the industry is critical, because it will avoid sudden account suspensions or closures in the future.

With the right documents in hand and these things in mind, you’re ready to start your cannabis banking relationship on the right foot.

Green Check Simplifies Cannabis Banking

Cannabis companies deserve to be treated like any other business, and that includes access to quality, reliable, and trustworthy financial partners. With Green Check, you can directly access resources, tools, and recommended vendors who want to work with you. From Green Check Direct and QwickPay instant ACH transfers to the Green Check marketplace with payroll, insurance, HR, and funding resources, Green Check can make it happen while you focus on growing your business.