According to the cannabis industry research group New Frontier data, the value of the U.S. cannabis market is going to reach $72 billion annually by 2030. From the statistics derived by the research group, it is clear that the state-legal marijuana industry has been thriving over the last decade.
How Do Cannabis Dispensaries Manage Their Cash?
The state-legal marijuana industry may be very lucrative; in fact, for many of these businesses, but the issue is not knowing where to keep their profits. Since the state-legal marijuana industry has limited to no access to traditional financial institutions, it continues to rely exclusively on cash transactions.
It’s not unusual to hear stories of business owners having to travel in armored trucks costing several thousands of dollars merely to deliver their tax payments to the nearest IRS office.
Even for professionals serving ancillary roles for state-licensed cannabis businesses, the banking situation has become a harsh reality. Even if banks are willing to offer state-legal marijuana businesses access to banking services, the relationship is frequently one that the bank wants to keep confidential out of concern for the stigma it may cause among its clients and the general public. And, more importantly, out of fear of the possibility of being prosecuted by the federal government for violating a number of federal laws.
Cannabis Market In The US
Cannabis legalization has advanced significantly in recent years. Marijuana is lawful for medical use in 38 states, while it is also legal for recreational use in 18 states. By the end of 2022, the US cannabis business will employ roughly half a million people and generate about $33 billion in revenue.
It’s important to remember that the legalization of cannabis has had a significant effect on the illegal market for the substance. Customers no longer have to deal with shady drug dealers and can now get high-quality cannabis from legitimate businesses.
As most people know, cannabis banking is still in its inception because the sector relies heavily on cash. Traditional financial services, including standard payment options like credit and debit cards, are not available. Cash transactions are risky and cumbersome, thus the market is looking for alternatives. The cannabis industry is constantly looking for ways to reduce its dependency on cash. Some of these payment options are great, but others are just deceptive workarounds.
Credit cards are not accepted, but credit/debit card companies have their own networks to help the parties to transactions transfer funds. Since these entities own the networks, they decide how they can be utilized. However, all major credit/debit card companies have publicly stated that cannabis transactions would not be supported by their networks.
Secure And Fair Enforcement Banking Act Of 2021
With the Secure and Fair Enforcement Banking Act of 2021, marijuana-related businesses, often known as MRBs, or legal marijuana producers, processors, transporters, and sellers, will have access to banking services on par with those available to other legitimate industries of the economy.
The United House of Representatives passed the SAFE Banking Act on April 20, 2021, to align federal and state “financial services access laws” by prohibiting federal regulators from penalizing banks that work with MRBs. Banking and cash management have been among legalized marijuana’s biggest obstacles.
What Does The SAFE Banking Act of 2021 Allow?
- Financial Institutions will be able to provide financial services to the cannabis industry.
- Loans for cannabis-related business owners, real estate, or equipment rented to a cannabis business.
- No financial institutions will be penalized for getting affiliated with the cannabis industry.
- Traditional financial services can be extended to cannabis businesses.
Steps To Open A Dispensary Bank Account
Make a list of local banks and let them know that you own a cannabis business and want to open a dispensary bank account with them. Be patient because you may have to face a few rejections.
Once you get a nod from a bank, vet their customer service and relationship management process. The next steps will be going through their terms and conditions, and understanding the restrictions and limits (deposit and hold). Enquire about their fees for payrolls, cards, wires, online banking, and more.
The process of opening a business bank account is pretty much the same as any other business. But it will require a little more time and paperwork due to the nature of the business.
List Of Documents To Open A Dispensary Bank Account
- Photo ID
- Proof of personal address for the director/s.
- Articles of incorporation/organization.
- Cannabis Business License/permit.
- Documents for tax reporting purposes.
- Proof of business address (the bank may visit the location)
- Many accounts may also ask for a minimum deposit amount to open the account.
This is a basic list of documents required, confirm with your bank what else they may need to help you open a bank account.
Even though states are legalizing cannabis in some form, the fact that it remains illegal on a federal level creates a huge obstacle for CRBs trying to access the financial services industry. More banks than ever before are willing to join the cannabis market, even if the majority of banks are still reluctant to provide services to this quickly expanding sector.
The SAFE banking act of 2021 can bring some relief to cannabis businesses trying to use banks.