How passage of the SAFE Banking Act could impact cannabis businesses

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The SAFE Banking Act is nearing the finish line in the U.S. Congress, and many expect it to become law sometime in the near future. The main question is when.

That could mean a seismic shift in the U.S. marijuana industry, given that the lack of banking services has been one of the largest business hurdles faced by cannabis companies for decades.

Many companies still operate on a cash-only basis because they’re unable to obtain or keep bank accounts.

So a new federal law that would grant banking access to all state-legal marijuana businesses would be monumental.

Marijuana Business Daily reached out to a cross-section of U.S. cannabis entrepreneurs to ask what it would mean for their businesses if the SAFE Banking Act was passed and financial services suddenly became available.

(Responses have been edited for length and clarity.)

Name: Denise Mink

Title: Owner

Company: Med Pharm

Headquarters: Broken Arrow/Coweta, Oklahoma

Business type: Dispensary/Processing

Do you already have banking access of some sort?

We recently were able to open a bank account in our state. It was a brutal application process, and it is not cheap—almost like adding an employee as far as cost.

Unfortunately, the bank is two hours away, so it’s time consuming to deposit money.

But we are still appreciative to have this option. We are still limited who we can pay with a check written off our business (account), but it has helped tremendously.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

If traditional banking would be available to us, it would change the way we grow our business.

We would be interested in branching out to other locations, but we do not want to lease.

We want to purchase. If banking was opened to us, then that would become a viable option.

Tracking of money would be so much easier as well.

We spend several hours a week dealing with the cash end of this business – time we could spend growing our business in other areas.

The SAFE Banking Act would open up insurance options as well.

Currently, there are only a handful of companies willing to underwrite a cannabis business, and the rates are steep.

New players to the insurance game should help our bottom line greatly.

Would passage of the SAFE Banking Act be a big deal for your company?

We would be thrilled if SAFE Banking passed.

The difference with limited banking options was a huge plus for us, so I know if we had full access to traditional banking/lending, it would make an even larger difference.

Anything that helps the legitimacy of our industry is a positive thing.

The changes we could make to our business would be beneficial almost immediately.

What banking services would be most helpful to you and why?

Being able to accept credit cards and debit cards without going through a third party would be amazing.

We hate that our customers have to pay a fee to pay with a debit or credit card. We don’t see a dime of that, but our customers don’t know that.

We are in a rural area. (There’s) not a lot of wealth in our area. It’s hard to see people throwing hard-earned money away simply because we do not have banking options.

Lending is one of the most appealing benefits to traditional banking. To be able to grow our business like traditional non-cannabis businesses would be amazing.

The bank we currently use allows us to process payroll, but before, we had this bank (where) that was not the case. Payroll was a big, big pain.

Also, paying our monthly state and MMJ tax is something that could be easily done with a bank account versus gathering tens of thousands of dollars and heading to the tax commission to pay our bill.

Even something as simple as ordering online is a huge obstacle. Hard to participate in e-commerce without a bank.

Would you apply for a business loan? And, if so, to what end?

Without a doubt we would apply for a loan to both refinance our current property and perhaps purchase another location.

Interest rates are very low right now, but owner carry rates (the route most marijuana businesses must take) are not.

We were established credit-wise before entering the marijuana field. But banks do not care about your credit score when your money comes from marijuana. It makes no sense.

It is barbaric and needs to be changed.

Bottom line: Cannabis businesses want to be legal and accepted.

The marijuana business is stepping up in a big way as far as taxes, which are always higher than for any other business.

We are contributing at a time when our country needs it the most. We are an essential industry that deserves to be allowed to function like every other business in mainstream America.

Name: Peter Marcus

Title: Communications director

Company: Terrapin

Headquarters: Boulder, Colorado

Business type: Multistate operator with vertical operations in Colorado, wholesale grow/process in Pennsylvania, as well as grow/process in Michigan

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

From a business standpoint, it would create a level playing field in the form of rates and fees through additional competition in the cannabis banking market.

Cannabis companies that bank their money face fee and rate gouging due to limited competition among banks that accept cannabis industry dollars.

Federal cannabis banking reform would open the door to financial transactions with traditional mainstream banks, providing certainty and stability to a volatile cannabis marketplace.

Investors would be comforted by news of federal cannabis banking reform, opening the door for more private investment options.

This has the potential to fuel expansion plans, especially in existing markets where product shortages already exist.

Expansions and a stable cannabis banking system would result in significant business cost savings on a scalable level, allowing companies to pass savings on to patients and consumers.

If federal cannabis banking reform includes an elimination of the 280E tax on the industry, then we’re talking about a significant stream of additional revenue that the company could keep, allowing us to create more jobs through expansions and, of course, provide critical economic development opportunities in new markets.

Would passage of the SAFE Banking Act be a big deal for your company?

Terrapin is operating successfully without federal cannabis banking.

Revenue continues to grow for us as a company year-over-year, with double-digit growth seen just this year alone.

While we will continue to grow and expand as a company, we face limitations without access to federal cannabis banking standards.

It’s not so much that it’s critical to us as a company in terms of our ability to expand. Our footprint will grow regardless.

But in terms of bringing stability and comfort to investors and customers, cannabis banking reform would be a big deal.

We would face a greater scope of options in terms of making financial decisions about our growth, and we would benefit from traditional fees and rates.

Customers would see savings passed on to them, and we would offer them public-safety comfort by knowing that there is a safe and secure system in place to handle cannabis money.

What banking services would be most helpful to you and why?

Opening up credit card services would be key. The industry is largely confined to cash and processing debit cards.

Being able to accept credit cards would have significant potential for us as a business, as it would open up payment options for consumers.

It would also be helpful to limit the amount of cash handling we do as an industry.

Banking reform would go a long way to limiting cash handling, which of course is a public-safety risk both for customers and employees.

Would you apply for a business loan? And, if so, to what end?

That is something we would assess as opportunities and needs arose. Terrapin has taken a slow and steady approach to business growth.

While some cannabis companies are focused on having the largest footprint through shareholder dollars, we have decided to grow based on organic revenue and accurate projections, product supply needs and prudent private investment raises.

We choose not to carry high debt as a company, so business loans might not always be the best option for us.

That said, it would be nice to know that we have that option as we continue to explore expansions in current and new markets.

Name: Seun Adedeji

Title: CEO and founder

Company: Elev8

Headquarters: Eugene, Oregon

Business type: Retail

Do you already have banking access of some sort?

Yes, we do. Thankfully, Elev8 has a track record and assets, and we can now rely on banking services. But getting to this point has not been easy.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

The passage of the act would be significantly beneficial to our business.

Today, 80% of cannabis businesses operate using cash only and 20% have some type of bank account.

Some credit unions are starting to offer services to cannabis businesses, but it can come at a considerable cost.

The cannabis industry is highly regulated, so every penny counts.

Due to this, cannabis is still a Schedule 1 drug, and profit margins are slim.

For example, regular businesses can buy something for $5 and mark it up to $10, and they would only be taxed on the $5.

In the cannabis industry, you are taxed on the $10.

Cannabis businesses are only able to write off the cost of goods sold, meaning if you invested $1 million into your business build-out, you can’t write it off as other businesses can.

Also, technology in the cannabis industry is 10 years behind.

QuickBooks and other advanced technology are not onboarding cannabis business, which makes the complexity of day-to-day operations harder than a traditional business.

Would passage of the SAFE Banking Act be a big deal for your company?

Yes, it would. The reason is simplicity, which is key to operating any business.

For Elev8, having normal banking access will simplify how we conduct business from compensating staff to paying for vendors’ services and merchandise.

Everything would become much smoother. It would help us operate as other businesses operate.

More importantly, it would finally normalize the cannabis industry.

What banking services would be most helpful to you and why?

The full spectrum at this point will be helpful.

Having access to all banking services will enable banks to provide loans and enable my business and other cannabis businesses to invest and grow more easily than we can today.

For example, debit and credit card processing is lacking in the industry. This is one particular service that would be extremely helpful to my business.

Would you apply for a business loan? And, if so, to what end?

Investors are focused on investing only in profitable companies. Many businesses that haven’t reached profitability could suffer.

However, access to business loans would help these businesses get access to needed capital.

As for Elev8 applying for a business loan, yes, I could possibly apply, but it would be based on my business goals and business needs at the time.

Name: Joe Rivera

Title: Chief financial officer

Company: Lume Cannabis Co.

Headquarters: Troy, Michigan

Business type: Vertically integrated cannabis company

Do you already have banking access of some sort?

Yes.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

It would allow us to bank our revenues as well as benefit from banking services which, to date, have not been made available such as lending and lines of credit.

Would passage of the SAFE Banking Act be a big deal for your company?

Yes. Beyond the benefits of traditional banking, it would increase the safety of our operations by reducing our reliance on cash.

What banking services would be most helpful to you and why?

Traditional lending and lines of credit.

Would you apply for a business loan? And, if so, to what end?

A revolving loan or line facility to fund working capital needs and continuing operations.

Name: Mike Beaudry

Title: Founder and CEO

Company: Herbl Solutions

Headquarters: Santa Barbara, California

Business type: Cannabis distribution

Do you already have banking access of some sort?

Yes. We have been very fortunate to have a solid banking relationship since we started the business in August 2018.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

From a daily operations perspective, it would change a great deal of things. It would:

  1. Eliminate the timely and expensive cash-handling process.
  2. Decrease COVID-19 risks associated with cash handling.
  3. Save significant time spent at a dispensary waiting for cash to be coordinated, prepared and counted.
  4. Greatly reduce the risk of robbery or assault.
  5. Eliminate our dispensary partners’ accounts from being shut down, causing significant AR delays.
  6. Improve available cash flow as deposits are no longer delayed for collection and counting by both Herbl and the bank.

Would passage of the SAFE Banking Act be a big deal for your company?

Huge deal, positively game changing to all cannabis businesses for reasons described above.

The absence of banking access is an unfair and punitive measure impeding the legal cannabis industry from advancing and scaling.

Although Herbl has had banking access since inception, it would be a big win for all dispensaries and supply partners to have the same access and allow the entire supply chain to operate as all other traditional industries.

Many of our partners lack cannabis banking and are forced to bounce from bank to bank or deal in cash only.

What banking services would be most helpful to you and why?

  1. Lending.
  2. Credit-card processing.
  3. ACH debit to enhance payment opportunities for our customers.

Would you apply for a business loan? And, if so, to what end?

Yes. We would look to secure an asset-based loan/line of credit as used in other industries.

The ability to finance assets and gain a flexible loan arrangement would be a significant benefit.

Name: Paul Lee

Title: General manager

Company: Dispensary33

Headquarters: Chicago

Business type: Marijuana retailer

Do you already have banking access of some sort?

Like most of the industry in Illinois, we’re fortunate enough to have a checking account and good relations with a bank looking to maintain a long-term relationship (meaning, their fees have been far less usurious than our previous bank).

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

The biggest changes would be the ability to accept credit cards.

Would passage of the SAFE Banking Act be a big deal for your company?

The credit-card piece would be great, operationally, but not a huge game changer, since customers are pretty habituated to using ATMs.

What banking services would be most helpful to you and why?

Whatever additional banking access we would have would not be a big deal.

Would you apply for a business loan? And, if so, to what end?

We don’t need debt at this time.

That would change if we chose to purchase the buildings we currently lease, or if we work with winners of the new social equity dispensary and craft grow licenses to get them up and running (if those are ever actually released).

Name: Shayne Lynn

Title: Executive director

Company: Champlain Valley Dispensary

Headquarters: Burlington, Vermont

Business type: Medical cannabis dispensary

Do you already have banking access of some sort?

Yes. We have worked with a local Vermont credit union for over three years.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

Our business plans and operations would change drastically.

We would be able to obtain a business loan and a line of credit, including company credit cards, like other businesses in the United States.

The SAFE Banking Act would also allow our dispensaries to accept credit cards, which would increase efficiencies at the point of sale system.

Our sales would increase since customers would have the option to use credit cards, which would reduce fees for those being charged fees to use cashless ATM systems.

The use of credit cards would also create a safer retail environment since customers could pay online via credit card.

Would passage of the SAFE Banking Act be a big deal for your company?

Yes, this would be a big deal for our company.

Not only would we be able to do all of the above, but it would further the normalization of the cannabis industry to both customers and staff – it further legitimizes the industry as a viable one.

Additionally, we would have the opportunity to expand and upgrade without relying on external funding sources – we would have more financial flexibility.

What banking services would be most helpful to you and why?

Business credit cards, loans and line of credit.

Would you apply for a business loan? And, if so, to what end?

Yes. We would apply for a business loan to increase extraction capabilities, cultivation capacity, kitchen automation, further develop employee benefit programs.

Name: Erin Gore

Title: Founder and CEO

Company: Garden Society

Headquarters: Cloverdale, California

Business type: Manufacturing, distribution, non-storefront delivery

Do you already have banking access of some sort?

Yes. We have both an MRB1 bank account and MRB2 bank account.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

First off, hopefully it would reduce the monthly fees we pay the bank for compliance.

These are incredibly prohibitive to small businesses and a challenge to manage on top of already managing difficult cash flow and profitability.

Second, hopefully the SAFE Banking Act would also allow more traditional forms of capital to enter the market, whether that be through banks as business loans or lines of credit, increased number of angel investors, new and diversified funds investing in plant-touching companies, or less predatory debt financing opportunities.

Would passage of the SAFE Banking Act be a big deal for your company?

As a small, women-founded and women-run company, we don’t have access to the same networks to raise capital as our male counterparts.

The SAFE Banking Act would bring more equal access to capital to all businesses in the ecosystem instead of only a select few.

Without access to affordable capital, any cannabis company has a very hard time reaching their potential.

The SAFE Banking Act can really help these small companies have new capital channels to scale and complete on a state, national, and even international level (CBD).

What banking services would be most helpful to you and why?

Loans and lines of credit would be the most important. Followed by a credit card for the company to use to purchase things online (hello, Amazon) and online debit card services for our e-commerce (which I know do exist in certain forms).

Would you apply for a business loan? And, if so, to what end?

Yes, of course! I would absolutely apply for a business loan as soon as it’s available.

It is a much more economical way to scale our company instead of giving away equity in the company for operating capital for growing inventory to keep up with demand.

Name: Richard Abromeit

Title: CEO and owner

Company: Montana Advanced Caregivers

Headquarters: Billings, Montana

Business type: Vertically integrated, seed-to-sale medical cannabis facility

Do you already have banking access of some sort?

Currently my business does not have its own banking account.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

As an owner in this crazy cannabis business for over 10 years, I have been anxiously awaiting a SAFE type banking bill.

I have watched a couple fall short in the Senate each time.

In the early years, banks didn’t make a big deal about what we did for business.

But it didn’t take long before we couldn’t discuss what we did with the bankers and had to cover the smell of cannabis on the cash deposits.

Eventually we would get the “letter” saying the bank was parting ways with us for varying reasons.

This became a huge issue for several reasons: security … having large quantities of cash around is never a safe avenue; paying day-to-day bills now involves actually going to the vendor in person to pay in cash or getting money orders (again, not safe).

Would passage of the SAFE Banking Act be a big deal for your company?

The money-order places have lowered their “suspicious” activity amounts, so in most places if you purchase $3,000 or more, you have to turn over your ID for reporting.

So, in order to not have our CFO “on the radar,” she has to run from store to store every week to gather up money orders all over town.

Another real kicker is the fact we have to pay payroll taxes to the federal government electronically only, and they don’t give banks the go ahead to take this money to send electronically to them.

They require us to pay a tax without the means to get the money to them. If they really want to follow the money, wouldn’t allowing us to bank it where you could track it make more sense?

And why is it OK for state governments collecting our marijuana tax money to bank this money, but we can’t?

What banking services would be most helpful to you and why?

The ability to work as a regular business with the ability to establish credit, take credit cards and take out business loans to help further expand the business, allowing us to hire more people and give benefits.

By allowing banking, you can give the smaller, craft cannabis businesses a chance to compete with the big money that inevitability comes rolling in with recreational, which seems to be the trend.

It would also allow them to attract more legitimate investors because the risk would be much less.

I just can’t do anything but shake my head at the fact that more than half the nation has a cannabis bill, and we still are treated like criminals without a bank. Just crazy.

Name: Shaya Brodchandel

Title: CEO

Company: Harmony Foundation

Headquarters: Secaucus, New Jersey

Business type: Medical marijuana

Do you already have banking access of some sort?

Yes.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

Access to loans/finance.

Would passage of the SAFE Banking Act be a big deal for your company?

Yes. Growth.

What banking services would be most helpful to you and why?

Federal banking/federal loans.

Name: Misty Carey

Title: Owner and CEO

Company: KannaKare Health Services

Headquarters: Bozeman, Montana

Business type: Vertically integrated marijuana company

Do you already have banking access of some sort?

I lost my banking in September of 2019.

For almost a decade, I had accounts with a small local bank who took good care of me.

I could even accept credit-card and debit-card payments.

Then they merged with a larger entity, and I knew my banking days were over.

Since then, we have been doing “ghetto banking” – money orders, prepaid cards or cash whenever possible.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

All that ghetto banking burns up resources, not only fees and charges, but time and energy of the staff.

Paying bills with autopays and regular checks sent via snail mail from a checking account uses far fewer resources. No standing in line at Walmart or the post office.

Paying the staff payroll and employee taxes from a company account also becomes possible.

When we lost our banking in 2019, we had to hire a payroll company that accepted money orders – another time and money drain.

It is also can be challenging to hire a good bookkeeper willing to work in the chaos of cash-only.

In summary, having normal banking would give our companies the opportunity to operate as efficiently as normal businesses without all the fuss of turning cash into paper to pay bills.

Would passage of the SAFE Banking Act be a big deal for your company?

It is a big deal to have banking. Cash handling is dramatically reduced when debit/credit-card processing is available, and we all know cash is super dirty.

Banking services would free up staff time to do more productive tasks than wait in line for a half-hour only to discover that the money order machine is broken.

Ordering raw materials online would not require a trip to Walmart to load that cash onto a Bluebird card.

The cannabis business is already complex and challenging. Doing banking as a regular business would make it just a little simpler.

What banking services would be most helpful to you and why?

Most helpful to me would be simple business checking and card processing.

Would you apply for a business loan? And, if so, to what end?

In the bigger picture, I want to be able to obtain real estate loans. I want to own the property that I use for business.

It makes no sense to spend tens of thousands of dollars to build out a space that I don’t own.

I want to buy land and build another grow barn with some awesome greenhouses. I want to buy another house for myself. I want to be able borrow money for real estate like a normal person.

At this point in my business trajectory, I would not likely seek a business loan for expansion.

But if some great opportunity appears in the future, I would consider it for sure.

Name: Rhory Gould

Title: Founder and CEO

Company: ArborSide

Headquarters: Ann Arbor, Michigan

Business type: Medical provisioning center (pending licensure, but temporarily operating)

Do you already have banking access of some sort?

Yes, through an ancillary business that is structured as a management company.

We had a bank account in our primary business name at the beginning of the year, but it was recently closed.

If normal business banking options become available for you in 2021 through legislation such as the SAFE Banking Act, how would that change your business plans or operations?

We could safely deposit all cash into our bank account and pay our vendors with checks or electronic funds.

We would also have easier access to loans for store upgrades and operation expansion.

Would passage of the SAFE Banking Act be a big deal for your company?

It would be a very big deal for the company.

We never know when the next account is going to be closed, so we’re constantly having to find new banks to work with using our management company as a shell for our dispensary to do banking and provide payroll checks for employees.

What banking services would be most helpful to you and why?

Having access to a bank account in our name would make things a lot less complicated for compensating our employees and paying our bills.

It would allow us to work with cash services to make larger deposits into an account.

Would you apply for a business loan? And, if so, to what end?

If the rate was reasonable, our business would apply for a business loan.

We have been operating at our current location for almost a decade and are well established in the community.

A loan could help us expand operations to multiple locations and license types, without having to lose equity in the business.

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