For much of the existence of the legal cannabis industry, cannabis businesses have been locked out of the banking system. Whether for legitimate concerns about regulatory compliance and liability, or just old-fashioned prejudice against cannabis and the newly legal industry around it, most banks have been unwilling to work with cannabis entrepreneurs.
Historically, cannabis entrepreneurs resorted to obscuring their operations or, in many cases, outright lied to the bank about what line of business they were in just so they could secure basic services like a checking account. In many cases, the only alternative was to conduct business solely in cash, which is unwieldy at best and dangerous at worst. The pioneers of the cannabis industry often had no real choice but to hide the truth from the bank as long as possible, either by registering with a generic business name or trying to cover up transactions from other cannabis businesses. This approach is common and pervasive.
Unfortunately, not being fully transparent with the bank – or wholly lying to the bank about your business — has real consequences. What’s at stake when you don’t tell the whole truth about your cannabis business to your banking partner?
Cannabis businesses that are not upfront and transparent about the work they do face a difficult choice: risk your account (and possibly future accounts) by lying to the bank, or conduct business entirely in cash. When you opt for the former and get caught, the consequences are great. Here’s what may happen:
The most obvious and severe consequence is that your bank finds out you are not being fully honest and chooses to give you the boot.
Still, many choose to obscure the truth to their bank full well knowing they could lose their banking at any time. For some businesses, this became a regular cycle; getting “kicked out” of their bank and looking for another bank was simply part of conducting business in cannabis. THC licensees, which are plant-touching businesses like cultivators and dispensaries, could expect to change banks between 3 and 6 times per year.
Naturally, frequently losing your banking relationship and scrambling to find a replacement, all the while worried about your lies being uncovered, makes for a stressful business environment. When cash flow is disrupted, so are operations. And until banking can be restored, many businesses grind to a halt.
Setting up a new bank account is also a logistical headache. Funds are frozen and have to be transferred; automatic bill payment has to be linked to new accounts; customers have to be alerted of how the change will affect them. Now imagine going through that once or twice per quarter – talk about a hindrance to normal business operations!
Lying to your bank immediately hamstrings your ability to build a brand and promote your business openly. How can you reach your customers without the bank possibly finding out your true activities?
For example, consider a hydroponics store. As an ancillary business, the store might be able to secure banking without too much difficulty if they suggest their products are for vegetables or gardening only. However, if they do that and their marketing materials advertise how great the products are for cannabis growers, the bank is likely to take notice and quickly terminate the account. If the business chooses not to market to a cannabis industry audience out of fear they will lose banking, they are likely to miss out on a major business opportunity.
Cannabis businesses are already unable to openly promote themselves on major social media platforms and many conventional media outlets like radio and television, so further limiting the marketing department’s ability to operate can cause serious problems for a company.
Finally, banks can provide a collaborative relationship for any business that works with them. This includes lending, cash management, market research, payroll services, and more. However, when you are actively trying to hide key facts about your business from your bank, those services become unavailable to you. How can your bank help you without taking a closer look at your business? They can’t, and if they did, you would lose your banking.
These banking services can be integral to helping a small business succeed, cutting off an avenue for many businesses looking for resources to grow. Cannabis business already faces some additional obstacles, including peculiarities in the tax code and difficulty accessing capital, but a good banking partner can be helpful in navigating those challenges. If you’re lying to your bank, though, you will never know how helpful they might otherwise be.
Lying to your bank is no longer necessary or reasonable, and no serious cannabis entrepreneur should consider doing it.
In those early years, there were zero banks openly working with cannabis companies. Today, there are more than 185 banks, totaling thousands of branches, working with state-legal cannabis businesses. More than 65 of those banks work with THC licensees; the rest take on clients across the hemp and CBD space, as well as ancillary businesses such as marketers, accountants, or security firms.
In other words, there is transparent and compliant banking available for everyone in the legal cannabis industry across all 50 states. You just have to know where to find it. Unfortunately, that part can be a bit of a challenge.
While 185+ banks servicing the industry is certainly a lot better than the zero of years past, it still only represents 1% of the wider banking system. Further, many banks have chosen not to publicize that they serve the legal cannabis industry. Despite gains in dozens of states across the U.S., there remains a stigma around cannabis that these banks might want to, even though they are happy to do business with the industry. Finding banks like these on your own could be nigh impossible, but they’re out there and ready to work with cannabis businesses.
So, where should you start?
Over the past decade, Fincann has established a network of financial institutions that openly serve the cannabis industry. Fincann can connect cannabis businesses to banking in all 50 states and regardless of their place in the supply chain. Better yet, Fincann can also provide merchant processing services so cannabis businesses can take major credit and/or debit cards.
With services like Fincann and a growing acceptance of legal cannabis among banks, there is no reason to lie to your bank anymore. It is worth it to have a properly managed and supervised cannabis account to liberate you from the stress, insecurity, and lost business opportunity that comes with hiding what you’re doing.
Stop lying to your bank. Instead, call Fincann and connect with a bank that understands and supports your business.