Which Banks Work with CBD and Cannabis Companies?
The hemp and cannabis industries exist within unique legal frameworks. Until recently, cannabinoid-rich hemp was considered synonymous with marijuana, and cannabis with high concentrations of THC remains federally illegal.
As a result, conventional financial institutions have historically been leery of working with hemp and cannabis companies. While this situation is starting to improve, you’ll still need to be relatively creative to access adequate banking services as a cannabis or hemp producer.
Banking options for MRBs
If you grow, process, or sell THC-rich cannabis, the federal government considers you to be involved in a marijuana-related business (MRB). Since THC-rich cannabis remains considered a Schedule I drug under the Controlled Substances Act (CSA), banks are considerably disincentivized from offering their services to MRBs.
According to existing law, any money banks hold that was produced by MRBs can be considered laundered. It is the prerogative of the federal government to seize laundered money.
As a result, major banks continue to view working with MRBs as unjustifiably risky. According to Marijuana Moment, however, 710 smaller banks and credit unions nationwide offer banking services to MRBs. If you’re in the marijuana business, your banking options are limited, but they aren’t nonexistent.
Which banks work with marijuana businesses?
At this point, no major, national banks offer banking services to marijuana businesses. Many small, local banks and credit unions, however, have determined that the benefits of working with MRBs outweigh the risks.
If you happen to operate your marijuana business out of Colorado, House Bill 1217 has made it legal for any state bank or credit union to provide you with banking services. THC-rich cannabis businesses in other states, however, will need to get creative.
1. Call local small banks
Even if you don’t live in Colorado, chances are there’s a bank in your state that will provide you with their services. Contact small banks and credit unions in your area, and ask them if they work with MRBs.
2. Wait for them to find you
Cannabis-friendly banks have been known to reach out to MRBs directly. If you want to keep things passive but speed up the process, make a post on Facebook or LinkedIn indicating that your cannabusiness is looking for a new bank.
3. Work with a cannabis payment processor
Companies like Naturepay specialize in creating business accounts for marijuana companies with compliant banks. While Naturepay and its competitors charge fees, handing out a cut of your revenue might be preferable to struggling to find an MRB-friendly bank on your own.
Alternative financial options for marijuana businesses
Even if you can find a friendly bank in your area, you’ll be saddled with oppressive fees. THC businesses commonly pay processing fees of 4-6%, which is more than triple the average in other industries.
As a result, many cannabis businesses have decided to thumb their noses at fiat currency altogether. Adoption of Bitcoin in the cannabis industry has accelerated, and it’s likely that this fusion of cryptocurrency and marijuana will only accelerate as Bitcoin’s value skyrockets.
Adopting cryptocurrency payments in your cannabusiness can entail a steep learning curve. If you persevere, however, you’ll gain the ability to process payments digitally all while relegating USD to the role of a placeholder in your price sheets.
What industry does CBD fall under?
Is CBD a marijuana-related business? According to the federal government, no, it’s not.
The 2018 Farm Bill opened the door for federally sanctioned hemp banking. Then, the Financial Crimes Enforcement Network (FinCEN) released guidance confirming that hemp growers and processors are free to bank as they wish.
There are no explicit federal rules, however, governing banking for secondary hemp businesses such as hemp extract wholesalers or direct-to-consumer CBD brands. Regardless, finding a bank as a CBD business is easier than banking as a MRB.
Can CBD companies use banks?
Since CBD is no longer a scheduled drug, banks don’t have to submit Suspicious Activity Reports (SARs) to FinCEN when they work with hemp businesses. As a result, the majority of small and local banks aren’t afraid to work with CBD companies.
What banks allow CBD business?
JP Morgan and Goldman Sachs recently announced that they’ve opened limited accounts for hemp-related companies. It’s possible that other national banks have taken similar actions, but they haven’t made public announcements.
If you don’t want to work with a major, national bank, most local banks and credit unions would be happy to hold onto your CBD money for you. Make some calls to banks in your area, and find out who offers the best terms.
Despite recent situational improvements, you still might have trouble securing banking and payment processing services as a CBD company. Consider working with a company like Hypur if you want to make CBD banking as simple and worry-free as possible.
Does PayPal work with CBD companies?
In early January of 2019, a user asked PayPal if this online payment behemoth was planning on changing its CBD policy in the wake of the 2018 Farm Bill. A representative responded by saying that “PayPal currently does not permit the use of our payments platform for the sales of products containing Cannabidiol (CBD).”
Many CBD companies continue to use PayPal anyway. If you’re successful, however, PayPal will eventually manually review your account. When this review occurs, it’s almost certain that you’ll be flagged as a CBD business, and your account will be unceremoniously shut down.
Does Square process CBD?
Square, a popular provider of point-of-sale (POS) payment processing and the operator of Cash App, has taken a wary stance toward the CBD industry. As of January 2019, Square has not changed its policy regarding CBD. This payment processor continues to ban CBD and hemp companies from its platform.
How to manage your money as a marijuana business
The federal government has remained almost entirely passive in the face of growing support for medical and recreational marijuana programs throughout the nation. Despite avoiding overt action, however, the feds still view THC-rich marijuana as an illegal drug.
Some cannabis companies have expanded on this inherently adversarial stance to become intentionally confrontational. Refusing to use anything other than cash and hiring armed guards to watch over heaps of hoarded bills, these semi-legal drug lords haven’t done much to advance the cause of federal marijuana reform.
Other cannabusinesses have striven to enter the financial mainstream with all their might. All too often, however, these optimistic green entrepreneurs have gotten burned with blocked bank accounts and unexpected total losses of payment processing.
As a contemporary marijuana business, you’d do best to take a moderate approach. Deal in cash when appropriate, but do your best to act like a normal business. Always remember that cryptocurrency is an option.
How to handle finances as a CBD business
Nowadays, CBD is essentially a mainstream industry. While banking for hemp wholesalers and brands is still relatively iffy, you certainly don’t need to hoard cash in a safe either.
Both the banking industry and financial regulators still aren’t sure about medical and recreational marijuana. Hemp and CBD, however, are well on their way toward receiving the financial establishment’s blessing.
Choose your payment processors wisely, and work with a local bank you can trust. Within a few years, it’s very likely you’ll have access to the same financial services as a comparable business in any less-volatile industry.