What It’s Like to Bank Cannabis

I thought I knew what I was getting into when I went to open a cannabis bank account two years ago. After all, I’m an attorney; I’m also a cannabis business owner. I’ve been through the process before. I thought opening a cannabis account for my own business would be annoying, but not difficult. I didn’t give much thought to monthly fees, or the banking platform, or a debit card. I knew the options were limited — only about 10% of all U.S. banks and about 5% of all credit unions provide cannabis-related businesses with accounts, according to analysts’ estimates. I needed an account quickly, so I was not about to waste time shopping around.

I won’t spend too much time rehashing the process itself. We went to a local bank in New Mexico but when we finally got to the end of the lengthy and cumbersome application process after several months, we had to pull the plug. The bank insisted that we provide three months of personal financial statements from each of our investors, no matter how small their ownership percentage. We argued this was invasive, unnecessary, and that it could damage our relationship with investors, who would certainly object to providing this information (not to mention the administrative hassle for everyone). We also told them that other banks with cannabis clients only required this for investors owning a substantial percentage of the company (~10%+). They would not budge, so the application process was terminated, despite months of time and effort.

From there, we went to a credit union outside the state that I knew and trusted from my industry experience. We were able to get the account open without too much additional work; we did not have to provide investors’ personal financial statements; and they had “shared branch locations” in New Mexico, so we could deposit and withdraw locally. Ironically, the local bank we started with became a “shared brand location” for our new credit union, meaning we could deposit money directly into the bank that rejected us.

Our experience with our new credit union was similar to peers in the cannabis industry — cumbersome, clunky, expensive, but necessary. That is to say, if the goal is to safely and compliantly bank cannabis, most of us in the industry have accomplished that objective. But if the objective is to do so at competitive rates and with access to “normal” banking services, then I think it’s safe to say the experience has been uniformly negative. 

Thought leaders in the cannabis banking space say that everyone should stop moaning and groaning when there are plenty of credit unions and banks all over the country (well over 100 now) in the space. They are right. There are more options than ever before. A month ago, it was big news that First Citizen Bank announced it would start accepting cannabis business accounts. The pain points of banking cannabis, however, are still very real for business owners:

Fees

I did an informal survey of six cannabis companies recently. The average monthly fee across them was $790/month, excluding the additional fee most pay as a percent of cash transacted in the account(s). This means that cannabis businesses often pay more than other small businesses just to have a checking account.

Account Management

Every bank transaction must be accompanied by an invoice and whatever other information is requested. For example, some banks want Biotrack or METRC reports (seed-to-sale tracking software mandated by states for their cannabis programs) as well as the invoice. Deposits must be accompanied by pictures of the checks and/or cash, as well as the deposit slip. 

Internal Audits

Strict monitoring, tracking, and reporting regulatory requirements put cannabis companies in a constant state of audit, making it more expensive for both the banks and the cannabis companies to do business.  These are really “rolling audits” because they never end. Many banks require quarterly and annual internal audit reports. Some banks also require external audits to confirm compliance with safety and employment laws. If the cannabis company does not get the audit, the bank can close the account. Dynamic Jack’s external audit was $1,500 (and this audit is required annually).

No Debit Card

Having a debit card attached to your account to use for online purchases seems like a luxury in the world of cannabis. Some banks provide debit cards to their cannabis customers and some do not. Some also offer other card-based solutions, but having no card-based solutions makes everyday transactions that much more cumbersome.

Platform & App

There is not a lot of good most of us can say about the platforms and apps (if they exist) that the banks provide. They are not user-friendly; they are slow; and they make it hard to move money.

The partial fix for this is the passage of the SAFER Banking Act, which, if passed, would provide a federal “safe harbor” to financial institutions that provide services to state-legal, licensed cannabis companies. The SAFE Banking Act, which has passed the House seven times and the Senate Banking Committee once (in the form of the SAFER Banking Act), includes access to mortgages, loans, low-cost bank accounts, and other crucial banking services currently unavailable to cannabis businesses. Senate Majority Leader Chuck Schumer (D-NY) announced that a cannabis banking bill is a “very high priority.” 

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The enactment of the SAFER Banking Act would positively change the broken cannabis financial ecosystem that exists today. While banking is available, it comes with exorbitant monthly fees. There is no credit card access; there may or may not be debit card access. There are no loans available (at least not without personal guarantees, valuable collateral, a year of revenue, and high interest rates). Extra fees and/or audit costs are around every corner. On top of that is the labor-intensive nature of having an account where every transaction is scrutinized. The end result of the current banking situation is that a significant amount of the legitimate cannabis industry operates in all cash, creating concerns for small business owners who feel unsafe and vulnerable — and leading to fraud, theft, violent crime, and the overall impression that cannabis is still a “shady” business. 

At this point in the development of the US cannabis industry, it is time for cannabis — which generated more retail sales in 2023 than chocolate, eggs, and craft beer — to be able to bank like any other business. While we wait for the SAFER Banking Act to pass, if you do find yourself opening a bank account, here are some questions to ask:

What are the monthly rate and cadence/basis of increases?

What are the additional fees (e.g., % of the cash transacted; external audits)?

What information must be provided with each incoming or outgoing transaction and how is that to be communicated to the bank (email, app, in person)?

How many audits, whether internal or external, are there per year?

Are there discounts for women-owned or social equity-owned businesses?

Is there a debit card or other credit/debit option available for the account?

Is the app and website user-friendly? 

What is the loan availability and terms, if available?

Cannabis banking relief is coming soon – probably this year. In the meantime, it’s important to understand the costs and limitations of maintaining a compliant cannabis account, so you can plan your budgets accordingly and SAFEly.