The Five “Be’s” of How to be More Bankable as a Cannabis Business
May 11, 2023
Myth: Cannabis companies can’t get a bank account or banking services.
Fact: There are a growing number of options for banking and financial services available to cannabis companies throughout the country. Banks, credit unions, and other financial institutions are raising their hands and accepting cannabis accounts regularly now. That doesn’t mean cannabis operators aren’t still having a hard time getting banked.
While there are a growing number of options, as a cannabis operator there are a number of things you can do to help get banking relationships and keep them for the long term because as anyone who has switched banks personally knows, switching banks is a hassle. For a business, it’s even more time-consuming.
As part of my job I talk to cannabis operators every day through the entire supply chain of the industry. From growers, distributors, dispensaries, and ancillaries, we passionately help cannabis operators get vital financial services for their businesses. From paying taxes electronically, making utility payments through bill pay, or switching from paying vendors in cash to instantly and digitally paying them with our QwickPay network, our team helps cannabis operators with treasury services and get cash out of the ecosystem of our industry.
Recently, the cannabis market has seen a downturn, especially on the West Coast. Here are the steps some of our most successful customers take to help secure their banking relationships and weather the storm.
- Be transparent. If you are working with a financial institution you need to tell them you are a cannabis operator. Some only work with cannabis operators and others are building robust programs. If your financial institution doesn’t know, you are at risk of having your account shut down at any moment which could have legal ramifications.
Why? Because financial institutions are required by law to know their customers and perform enhanced due diligence on cannabis companies. This can take time. So if your bank account closes because your financial institution doesn’t have a cannabis program, you will be left scrambling to pay vendors, taxing authorities, and employees. There are also ongoing monitoring requirements for financial institutions offering services to the cannabis industry. One is sales validations and knowing the source of funds. Green Check Verified, who acquired PayQwick, makes this requirement easier for cannabis operators and financial institutions by integrating with POS systems that serve our industry so sales data can flow automatically and be compared against deposits for a financial institution’s compliance team. This saves you time versus a financial institution that requires you to manually send over your sales.
Being open and honest about the state of your business with your financial institution could be the difference between your business failing or thriving. It can help them connect you with the right solutions.
- Be honest. No matter how many years I have been in banking, regular, or cannabis, it always surprises me when people try to lie to us, especially about how well their business is doing. If you are depositing with a financial institution, we know and notice how your business is doing. We aren’t allowed nor do we want to share private financial information about your business.
Why? You not only can but need to tell us how your business is doing because we want to help. Whether it’s finding lending options, offering cash management strategies, or different account types to save on fees, we want to help but can’t if we don’t know the full situation. Financial services for your business should always be a partnership based on trust and that starts with honesty.
- Be organized. Cannabis is arguably the most regulated and quickest-changing industry in America. Having your paperwork in order, especially through business model changes, ownership changes, and more is vital to the success of your business and the success of your relationship with your financial institution. Think of it like going to the DMV, you have to have all your documents in order and need them easily accessible and ready to go. The best customers keep detailed and organized records that are easily accessible by the team members managing the accounts.
Why? Financial institutions are required to document and know changes in beneficial owners, business structure, license changes, and more. If we don’t, we get in trouble with our regulators, and that can jeopardize our cannabis program and ability to serve you and the industry. Making sure the right people on your team have access to these documents is also crucial so they can communicate that with your financial institution quickly and effectively. As your business grows make sure you delegate authority correctly and have controls and backup plans in place. If someone is out, and they’re the only one with access to an important document, this will delay the process and could put your account in jeopardy.
- Be specific. Hire a cannabis accountant or retain accounting talent that can learn the complexities of cannabis tax and accounting practices. One trend we have seen is customers that either have in-house staff well versed in cannabis, or hire external accounting and tax professionals, not only are able to help provide what is needed for their compliance requirements with us as their financial institution but end up weathering the storm more successfully.
Why? Cannabis businesses require more than just basic bookkeeping. The tax issues from states, municipalities, and restrictions of 280E make it much more difficult and complex. Getting specialized help from professionals familiar with local and state laws is crucial. Additionally, having a finance team that is open to continuing to learn and grow is crucial as the laws and strategies are also ever-evolving.
- Be Open. Gone are the days of having to hide your business from your banker. There are multiple options available with financial institutions, like us, that will not only accept your cannabis business but welcome it with open arms.
Why? The more open you are with your banker about your business the more they can help you. Banking should never be transactional, it should be relational. It’s built on trust and open dialogue. Have conversations with your banker about changes happening, expansion plans, and even personnel. Bankers should be well-connected and help introduce you to others in your industry or who serve your industry. Multiple times I have had clients call me up and say, our payroll provider just shut us down, what can I do? We have built out a network of payroll providers that are happy to serve the cannabis industry and are happy to be the bridge connecting both parties. If you are expanding to a different state, knowing if your financial institution is even in the new state is important, if they aren’t they may know of someone who will.
It isn’t a lucky break anymore to get a bank account as a cannabis operator. You have options and by following the five “Be’s” you can ensure you get accepted and have a long-term successful relationship with your banker. Make sure you chose a partner who is passionate about the plant, and the industry, and is there for you to help your business grow, thrive, and leave a lasting legacy for our dynamic and burgeoning cannabis space.
Erica El Hilali, AAP, ACBP & MBA is Director of Cannabis Business Relationships at PayQwick powered by Green Check Verified.