The very real challenges the cannabis industry faces when trying to access financial services has led to a misconception that cannabis-related businesses (CRBs) simply can’t get bank accounts. While it’s true that many financial institutions (FIs) aren’t yet ready to bank the industry, a growing number of banks and credit unions are.  To help cannabis businesses better understand the banking landscape, why finding proper financial services is difficult, and what can be expected from a banking relationship, here are answers to frequently asked questions around cannabis banking. 

Why is it hard to get a bank account?

The short answer is because cannabis banking is risky for financial institutions (FIs), and bankers are committed to avoiding unnecessary risk. FIs have historically taken pains to keep funds associated with illegal activity out of their banks and credit unions, so FIs are sensitive to the conflict between state and federal cannabis law.  For instance, many FIs are regulated by federal agencies, but marijuana is a Schedule I Controlled Substance. They are also concerned with the potential negative effect that banking cannabis might have on their institutions’ reputation — concerned that if their customers/members find out that they’re a “weed bank” then they will leave and take their deposits with them.

There are, however, many banks and credit unions out there that have taken on that risk for a variety of reasons including building new revenue streams, the desire to serve the underbanked in their communities, and to support the transparency that goes along with bringing cannabis banking out into the open, among other reasons. However, this isn’t a decision they typically make lightly, and it often takes a while for progressive FIs to shift their culture away from seeing cannabis-related businesses (CRBs) as an unnecessary risk.

How can I find a cannabis-friendly financial institution? 

With very few exceptions, FIs are discreet about their cannabis banking programs, and you won’t find them issuing press releases or advertising these programs on their websites (though that has started to change over the past year). A CRB owner can be forgiven for thinking that there are no options available to them, but at Green Check we know from experience that there are very few areas in the country where CRBs do not have traditional banking options. 

A google search isn’t likely to help you locate a cannabis-friendly bank or credit union, so networking is key. Reach out to lawyers, accountants, and bookkeepers in your area.  If they are representing or working with other local CRBs, they may well know who they’re banking with or know someone who does. You should also consider reaching out to FIs directly even if you don’t know whether they’re working with CRBs. You might be surprised to find out they do, and if not they may redirect you to another FI in the area.

Additionally, Green Check Verified works with cannabis-friendly institutions in 35 states, and you can always contact us to connect you with a bank or credit union that’s the right fit for your business. 

What kind of financial institution should I be looking for?

First, don’t waste your time reaching out to the big national banks. Yes, you may have a friend that’s actively banking with one of them, but those are exceptions to the rule that are likely unsustainable. Once one of these banks finds out the true nature of their businesses, they will “derisk” them – FI code for “close the account”. 

Look instead for credit unions, community banks, and regional banks. There’s a myth out there that only local credit unions can bank cannabis, but that’s not the case. Additionally, for a CRB, the difference between the organizational structures of banks and credit unions aren’t nearly as important as what products and services they’re willing to offer. 

What kind of products and services can I expect?

The pioneering FIs that first took on the risk of banking the industry were exceedingly cautious, and it was relatively unusual for them to offer a CRB more than a standard small business depository account, i.e. a place to store cash but little else. However, we’re moving into a new phase of cannabis banking where we’re seeing financial institutions offer more than just a place to park cash. Some are starting to offer loans, payroll services, business insurance, etc., so it’s worth looking around to see what’s available out there.  You might find the new range of services surprising and comparable to business services for non-cannabis businesses.     

What should I bring to a meeting with a bank or credit union?

Every action taken by an FI, of every shape and size, is heavily scrutinized by state and federal banking regulators and law enforcement agencies. They want to make sure that banks and credit unions are only banking state-legal, legitimate CRBs.  Therefore, you can expect an FI to ask for some combination of the following:

  • Driver’s license or other acceptable state-issued identification for all account holders
  • Information about all beneficial owners of the business, not just those that own a percentage of the business above a certain percentage threshold (like 20%)
  • Previous year’s tax returns both for the business and the beneficial owners
  • Financial information like profit and loss statements and capitalization tables
  • A copy of any required state licenses
  • Operational data like expected annual sales and patient/customer counts
  • Business formation documents like articles of incorporation and a business plan
  • Sales transaction data – point of sale reports or invoices – for the past thirty days

Expect an FI to ask a CRB for more information than they would ask from any other small business. They need to be sure, beyond a shadow of a doubt, that the business is operating legally.  If it turns out later that a CRB isn’t following state law then the FI themselves can get into significant trouble for failing to vet them properly. This isn’t a risk they’re willing to take.

Why do I have to pay more for a cannabis bank account?

Behind the scenes of cannabis banking, FIs need to do a lot to make sure that they’re only banking state-legal CRBs, from collecting and reviewing point of sale transactions to meeting rigorous federal and state reporting obligations specific to marijuana-related businesses. This means FIs often have to hire additional staff to meet their compliance obligations and invest in software to automate some of their monitoring requirements. FIs make a big investment in banking cannabis, and account fees help them offset these expenses. This means that you can expect to pay an account application fee and a monthly account maintenance fee to help cover these costs. Prices have certainly come down over the past few years.  Gone are the days of paying $5,000 a month for a simple deposit account, but fees will remain significant as long as there is a significant monitoring and reporting burden placed on FIs.

Are all cannabis businesses charged the same fees?

Fees vary from FI to FI and from CRB to CRB.  If there is any kind of tiered pricing model in place, then Direct CRBs like dispensaries will typically be charged the most while Indirect CRBs like hydroponics suppliers may be charged less. Any business that touches the plant presents the highest risk, and that brings with it the highest fees.

I’ve already got a bank account, and they don’t know I’m a CRB so I don’t pay those fees. Why should I switch to an FI that banks cannabis?

FIs are becoming far savvier about detecting CRB activity among their existing customer/member accounts. At this point it’s not a question of “if” your financial institution will find out you’re a CRB, it’s a question of “when”. Few things are as disruptive to a business as getting a letter from your FI informing you that your account will be closed in thirty days. Don’t put yourself in that position.  Additionally, you may be missing out on vital financial and business services by staying “under the radar” and not having a transparent relationship with your bank or credit union.  Start looking for a cannabis-friendly bank or credit union today so that you can part from your current FI on your own terms. If you need help finding one, Green Check Verified will be happy to make an introduction.

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