Starting a new business should be a rewarding and exciting experience. When your business is in the medical cannabis industry, it can be all that and more. But your experience can also be fraught with problems that other industries do not have to deal with. The lack of bank access is a good example.
Did you know that the majority of medical cannabis dispensaries around the country are cash-and-carry operations? A few have managed to find partners willing to facilitate electronic transactions, but most deal only in cash. They have to for the simple fact that banks will not do business with them.
The banking issue is directly related to marijuana being classified as a Schedule I controlled substance under federal law. Because of its status, businesses operating in the medical cannabis space are technically operating illegally. Any banks doing business with them would be facilitating that illegal activity.
Way Too Much Risk
For your typical regional or national bank, doing business with the cannabis industry involves way too much risk. Banks risk legal action should federal authorities choose to enforce the law. They risk backlash from shareholders and investors who do not want their money tied up in the cannabis industry.
Liability is another concern. In our heavily litigious society, no one would be surprised by a class action lawsuit filed against a cannabis business casting a wide enough net to include banks that processed the defendant’s transactions. Banks have no appetite for such liability.
Limited bank access only makes it more difficult to do business, according to Utahmarijuana.org. Utah is one of the most heavily restricted states in which medical cannabis is legal. Its many rules and regulations are only exacerbated by the banking issue.
Imagine you own a dispensary in Salt Lake City. Your operation has been cash-and-carry since you opened. While you are managing, dealing only in cash presents a number of logistical and security problems. Having access to traditional bank services would make your life so much easier.
One of the big problems you have is paying your bills. Your landlord isn’t too keen on receiving monthly rental payments in cash. They require him to make a special trip to the bank every month. He would much rather get a check or an electronic transfer.
When it’s time to pay your electric bill, you either have to purchase a money order or visit a local alternative financial services provider and have them wire your payment to the utility company. You endure the same hassle with every other bill you pay.
As far as security is concerned, your dispensary has a visible target painted on the front door. Criminals know that your operation is cash-and-carry. They know you have thousands of dollars on hand at any given time. They also know that the cash leaves the premises with you when you lock up at the end of the day.
An Issue Needing a Solution
The obvious solution here is to come up with legislation that limits risk and liability among banks. Give them the legal authority to deal with cannabis-based businesses without fear and they are more likely to take the plunge. South Dakota is in the midst of working on legislation even now.
If one state can do it, every state can. For that matter, so can Washington. Furthermore, it is the right thing to do. While Washington and the states continue working to figure out the best way to approach medical cannabis, business owners shouldn’t have to suffer. Give them access to banking services and let them do what they do.