The cannabis industry has exploded in the past several years. In the US alone, it’s expected to reach $30 billion by 2025. With legalization of marijuana use becoming more widespread, it’s no surprise that banking and financial services have followed suit. However, despite being legal in some form or another in many states, banks still face a number of hurdles when working with cannabis businesses. One of these challenges is related to banking—unlike other industries, those operating within the cannabis sector do not have access to traditional banking services. This means that companies must find alternative financial solutions if they wish to remain compliant with all applicable laws.
So what do we need to know about banking and finance in this emerging market? Here are a few key concepts to understand when looking into cannabis banking:
1. Federal vs State Laws
As mentioned previously, while legalized on the state level, marijuana is still considered an illegal drug under federal law. This discrepancy between state and federal law often presents challenges for banks who work with cannabis businesses as they must make sure their compliance is up to federal standards, but without running into any legal trouble in the states they operate in.
2. Credit Unions
Credit unions offer a more secure option for those looking to get involved in cannabis banking. Because credit unions are member-owned organizations, they can often be more willing to work with marijuana businesses as there is less fear of potential criminal charges or other legal backlash. Additionally, since many credit unions are nonprofit organizations, individuals and businesses partnering with them may be able to take advantage of certain benefits not available at traditional banks.
3. Financing Options
For cannabis businesses who need capital to expand their operations, traditional bank financing options may not be available due to the industry’s legal status. However, there are a number of alternative financing options available to those looking to finance their business. These include crowdfunding websites, venture capital firms, private investors and more.
4. Payment Processing
Another potential problem faced by cannabis businesses is the issue of payment processing. Most banks and major credit card companies will not process payments from marijuana-related businesses due to federal prohibition laws, so it’s important for businesses in this industry to look into alternative methods of taking payments from customers.
5. It’s Important To Have A Bank Account
For cannabis businesses, it is important to have a bank account—even if it is with an alternative financial services provider. This will allow them to accept payments from customers, as well as pay vendors and suppliers, all while remaining compliant with state and federal regulations.
Cannabis banking is an ever-evolving field with new developments occurring all the time as laws change and more financial institutions become willing to work with marijuana-related businesses. Understanding the basics is essential for anyone who wants to get involved in the industry. With this knowledge, entrepreneurs and businesses as Green Leaf Business Solutions can make informed decisions about how to safely and securely handle finances related to their cannabis business.
The marijuana industry is here to stay, and with it comes a great opportunity for those willing to take advantage of the banking opportunities that come along with it. By understanding the legal considerations and potential risks associated with cannabis banking, entrepreneurs can find secure financing options, payment processing solutions, and other financial services that help them succeed in a rapidly growing industry.
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