How Cannabis Banking Promotes Social Good

For a space that’s long operated in the shadows, transitioning to compliant, supportive, and transparent financial services is not a given, or an easy process, for cannabis companies. Much of that is fueled by what’s perceived as a lack of provider options, forcing some companies to choose masking the true nature of their business or going unbanked altogether. But this way of business is detrimental to our communities. Thankfully, financial institutions (FIs) can help.

When cannabis businesses have access to safe, reliable banking and financial services, the entire community wins. Whether you’re thinking about servicing the cannabis industry or you’ve been around the block in this space, know that your services can promote social good and healthy communities. Here’s how.

5 Ways Cannabis Banking Creates A Positive Impact

Cannabis banking may be far from universally available, but improvements to access have made clear that cannabis-friendly financial services benefit everybody, not just the industry at large.

1. Banking contributes to anti-money laundering efforts

The long-standing federal prohibition against cannabis has led to an unlicensed market that drives billions of dollars in sales each year. All the cash used in these illegal transactions can’t be put into the banking system without being made to look legitimate first, a process known as money laundering, a Class B felony. As a result, FIs and regulators alike tend to scrutinize legitimate, fully compliant cannabis businesses more closely than other kinds of companies — and that’s for good reason.

Legal cannabis businesses with compliant banking services mitigate the risk of money laundering. FIs are required to hold cannabis clients to strict know your customer (KYC) and anti-money laundering (AML) standards, monitoring every dollar that flows into the business’s bank accounts and understanding the precise nature of every transaction. By keeping tabs on a client’s entire supply chain and anchoring every dollar to a specific sale — with the help of data you can access from the cannabis company — FIs help to combat money laundering and protect the integrity of the financial system.

Does your bank need monitoring solutions for your AML due diligence? Check out Green Check Verified, which gives you unprecedented transparency into your clients’ sales and financial data.

2. Improves safety around cannabis operations

Access to banking services has historically been limited for legal cannabis businesses, so many have chosen to deal primarily (or solely) in cash as a result. Unfortunately, this makes legal cannabis businesses major targets for burglary, since criminals know there’s quite a bit of cash on-site at a dispensary. For example, California cannabis dispensaries reported 329 robberies or break-ins with losses in 2022, which was more than double the 147 incidents reported the year prior. These robberies can be serious, too; in many of the California cases the burglars were armed, and an employee was kidnapped in at least one.

The ability to deposit cash reduces the risk of robbery, protecting cannabis businesses’ employees and assets. As cannabis banking becomes a more common practice, it could even disincentivize attempted robberies of these locations altogether. After all, if most cannabis dispensaries have a bank and don’t keep cash on hand, why risk burglarizing such a high-security location?

3. Provides cash flow stability

Without access to banking, accounts receivable (AR) and accounts payable (AP) are seriously impacted. In some cases, cannabis companies have turned to third-party payment platforms or rely on in-person exchanges. One approach eats into a business’s profit margin and the other is sluggish and unreliable. When companies have suppliers and employees to pay, they need to be able to move money around quickly.

Supporting a cannabis business with financial services means they can access the tools in the financial system, like ACH deposits and wire transfers, that other kinds of businesses access with no issues. That enables these businesses to simplify collections and vendor payments, make projections based on reliable timelines, and streamline their back office. Those are recipes for continued growth and success — growth and success hopefully fueled by funding and lending products offered by your bank.

4. Extends financing to legal cannabis businesses

Businesses need capital to grow, but cannabis businesses are generally cut off from financing options other businesses use, such as lines of credit and term loans. Whereas most businesses can simply go to a bank and request a loan or apply for a credit card, cannabis businesses have historically been forced to seek private funding, either raising money from friends and family or going to a private investment fund for support. The drawback is this money is expensive, often costing equity or bearing significant interest rates. It’s also highly selective, even when the borrower is a prime candidate.

When working with a cannabis-friendly FI, accessible financing options become available to cannabis companies. As a window into financing, cannabis banking supports businesses as they grow. These funds are essential for hiring more employees, carrying more brands in a dispensary, or even opening a second location — all positive growth opportunities that uplift your community.

5. Strengthens the local economy

Cannabis businesses generate a lot of revenue, and when they can bank those dollars they can spend them in the local economy. That support could come directly in the form of hiring local employees, enlisting the services of local vendors, and buying local goods.

At the end of the day, cannabis businesses are legitimate businesses, and they want to foster a healthy, happy community as much as any other entrepreneur. By giving them the tools they need to succeed and grow, FIs make that mission a reality.

How to Offer Cannabis Banking To The Businesses That Need It Most

Some cannabis operators have had unpleasant experiences with financial institutions, so the introduction stage can sometimes be difficult. However, with a bit of patience and understanding, you can forge a trusting relationship. Cannabis operators who have been desperate for access to reliable banking and financial services will soon become your most enthusiastic clients if you can demonstrate your commitment to serving them and the cannabis industry.

Here are a few tips to start off on the right foot.

• Work with Green Check to find verified cannabis operators: Green Check takes the guesswork out of cannabis banking. When you join the Green Check Connect marketplace, you become part of a network of verified cannabis operators and cannabis-friendly financial institutions that entrepreneurs in the industry regularly use as a trusted resource. We do the heavy lifting for you so you can trust that you’re working with compliant cannabis businesses. And with tools like Green Check Verified, you can ensure these clients stay compliant throughout your entire relationship.
• Make cannabis banking accessible: Most cannabis operators don’t care to parse banking jargon and legalese, so when you approach a potential client, be sure to be straightforward in the language you use. Be direct and clear — use concise explanations that business owners will appreciate. They don’t want to be experts in finance; they want to run their business, and they trust you to explain things to them accurately and clearly.
• Focus on building trust: You need to go the extra mile to assure them that your organization is enthusiastic about working with the cannabis industry and that they can be open and honest with you. Dispel the wary feeling many cannabis operators have when dealing with financial institutions by making clear commitments and sticking to them.
• Be clear about what you need from cannabis operators: Going through the onboarding process can be daunting, especially for a first timer. No matter how familiar you may be with the process, remember that cannabis operators don’t work in the finance space every day. Help them by explaining precisely what’s needed on your end to process their application quickly and efficiently. Chances are they will be more than happy to get all the right documentation together, but they don’t know what they don’t know. Make it easy for them to give you what you need.

Get Into Cannabis Banking With Green Check On Your Side

Although cannabis banking has been historically fraught with challenges, there’s a brighter future on the horizon. Financial institutions like yours, which are dedicated to helping legally compliant cannabis businesses grow, are critical for the success of the industry.

By working with Green Check and following the steps above, cannabis operators will be able to feel secure and confident in working with you. Green Check Verified makes it easy to manage the entire banking relationship, from the initial application to ongoing transaction monitoring. This suite of tools makes it easy to meet all compliance requirements from the jump, without taxing your resources and without missing a beat. Get started by speaking to an expert and get to know why more than 150 FIs trust Green Check with their cannabis banking programs.