Although cash may be king, dealing in cash makes you feel less royal. Modern businesses depend on banks and credit for all things money. This includes everything from gathering cash to counting cash to paying your bills in dollars. The federal regulations that apply to cannabis remain strict. This means they are not able to access the same banking services as other businesses. What are the regulations regarding dispensaries and banks? How can professionals in the cannabis industry gain credit?
Why is it so difficult for cannabis businesses to find banking?
Banks are among the most risk-averse institutions around the globe. They look for steady clients, but they won’t lend money they don’t expect to see back. Federal regulations are a key aspect of banking risk. They clearly state where banks can and can’t lend money.
Although cannabis is legal in many states for medical and recreational purposes, federal law still prohibits its use. Banks are not allowed to finance cannabis businesses as it is a Schedule 1 drug. They could be charged with aiding or abetting a federal crime. Worse, banks that provide services to cannabis businesses may be charged with money laundering.
Many dispensary owners and other cannabis business owners are often frustrated and worried. Operating a cash-based business in 21st-century times is difficult. This includes maintaining security and taxes.
The SAFE Act
The Safe and Fair Enforcement Act may open new doors for the cannabis sector by relaxing federal banking regulations. The SAFE Act, which was the first federally-adopted cannabis-specific bill, was introduced in 2019. However it failed to pass the Senate. The law, if reintroduced in 2021 would allow banks to offer financial services to cannabis industry clients and not risk legal penalties.
Although it needs to be approved by the Senate before being signed into law, this bill would make a significant impact on banks and protect them from criminal and civil prosecutions. The SAFE Act, which would legalize lending to cannabis businesses and legalize insurance coverage, would be a major step forward. This would mean that dispensaries wouldn’t be liable for any commercial losses that could devastate a company’s health.
You can find banking for your dispensary now
Even if the SAFE Act is not passed by the U.S. Senate some banks will lend to cannabis businesses. Because they are more likely to be investigated by federal authorities, smaller credit unions have been the only source for relief for dispensaries. However, banks for cannabis businesses often require large feeds to cover the additional costs associated with the process. There is a lot of paperwork involved.
The state laws are moving at a faster pace than the federal laws. In Colorado, for example, the state changed its lending statutes in 2020 so that banks could finance the cannabis industry. It is now legal in certain parts of Colorado to get a loan from a bank for a dispensary and to allow customers to pay with credit cards.
Why dispensary owners need a bank account
Businesses need bank accounts to manage cash flow and stay afloat during difficult times. It is easy to track and analyze your operating income and expenses. You can also get interest on your money. Additionally, banks make it easier for cash to be collected and processed, as well as armored courier pickups and deposits. Banks can streamline expenses by allowing owners to automate payments for everything, from employee paychecks to utility bills and taxes.
Banks offer more than money. Business owners can access their account 24/7 via a smartphone or computer. This allows them to deal with spending issues immediately, rather than waiting for cash to accumulate. A bank account manager can help an owner to understand how money is managed, make suggestions, and plan the best way to put capital to work. All banks are FDIC-insured, which means that accounts up to $250,000 can be protected against theft. This is something that will never happen to cash.
Zena Financial Can Be Helpful
Any business owner can find it difficult to manage the banking process, especially if they are dealing with cannabis businesses. Zena Financial is a company that assists business owners in securing bank accounts to support their growing businesses. Get in touch with our team today.