Cannabis business banking options can be tricky in the current climate.
If you’re already in the cannabis industry, at least in the US, you probably understand that cannabis business banking opportunities aren’t exactly falling out of the sky.
If you want to skip to the end of the article to see my list of the first ten things you need to get your banking affairs in order, I won’t be offended.
So far in our series, I’ve talked a bit about the history, and the current legal system in the US; Canada is a different situation, but I’m going to leave that for another day. I’ve also detailed, in part 2, the reasons for why cannabis business banking and payment processing is going to be classified as high risk in the foreseeable future by the banking system, no matter how the legalities of marijuana, CBD and accessories go politically.
Quick update for US based businesses on the federal front –
In February (2/23), the White House, or at least Sean Spicer, insinuated that rec use marijuana could see stronger enforcement, while seemingly distinguishing between MMJ and rec use. We already know that Spicer doesn’t really speak for anyone, including the president, based on the short history of the current administration.
This was followed by a Twitstorm on Roger Stone’s part (he’s a Trump advisor) about how the feds shouldn’t enforce marijuana laws.
Jeff Sessions, the AG, seems to have his hands full with the Russia thing right now, but he’s definitely not in favor of letting people use cannabis, for any reason, really.
[LISTEN: What happened at the ballot boxes in November with US marijuana laws? – PODCAST]
And California is gearing up for a battle with the feds, if it comes to it.
Rec use was approved on a ballot initiative last fall, and LA county voters refined some of the rules this week with the Prop D/Measure M replacement that was a big success at the polls. This measure will allow LA County to change a few regs, including adding the option for cannabis delivery services to legally exist in the county.
California’s Treasury department also has added a working group to determine how the state is going to try and facilitate cannabis business banking.
Moving on to the banking bits…
Quick background, in case you haven’t read the earlier parts, banking is controlled (in reality) by ABA routing numbers and SWIFT codes. Without an American Bankers Association routing number, a bank can’t do much of anything but take deposits and issue loans to its customers. Nobody can write a check or transfer funds, or any of that good stuff, since the ABA routing number controls everything domestically.
The SWIFT or BIC code (Business Identifier Code) does the same thing on an international level. Which means that a bank in England, China, or Curacao must have a SWIFT code in order to send or receive money from other banks, like the ones in Nebraska, Vancouver, or France.
Credit unions also have ABA routing numbers, even though they are governed and insured by the NAFCU, instead of the FDIC. And they also need SWIFT codes to manage international money transfers.
What does this have to do with setting up accounts?
Everything. Duh. If your bank loses their ABA code, they’ve effectively been shut down as a bank. They can’t communicate or play nicely with other banks. Same thing with credit unions, so thinking that you’re safe because you have an account there is a false sense of security. Cannabis business banking is a risk that a lot of banks aren’t ready to face, and that’s not likely to change in the near future.It only takes one letter from the Treasury, threatening these institutions, and they roll over and play dead. Click To Tweet
Not just the US banks, either. The adoption of FATCA, in 2010, after several years of threats and wrangling worldwide, have given the US regulators the power to control finances worldwide, for the most part. After all, international banks that can’t do business with US banks, they aren’t really international.
Ok, now what?
Well, let’s talk about a few specifics, starting with your business structure. I’m not guaranteeing that you’ll get a bank account, or that you’ll be able to find a bank who wants to process your payments, but these are a few general rules for all high risk accounts.
I can promise that you won’t find cannabis business banking that will handle credit card transactions without everything on my list.
As promised, here’s my list of the FIRST ten things you need to do in order to get banking and possibly transaction processing for your business.
#1 – Don’t make it more difficult for mainstream institutions to approve your business.
I don’t care if your dispensary or delivery service is called “Marijuana for All the People”, “Green Goddess MMJ”, or “Cannabis Connection” (really, I have no idea if these are business names, I just made them up), you should be a bit more circumspect with your corporate name. “GreenWell, Inc” or “Distributors United, LLC” (again, made up names) have a much better chance of not being noticed at any level.
It’s already enough that the FinCEN rules (see part 1) create a level of compliance that no bank wants, there’s zero reason to push the envelope and make yourself a target when you don’t have to be.
#2 – On that note, make sure you have a corporation.
Corporations do two things; first and foremost, they make you look like a legitimate company. And if you’re in a legal state, then we’ll just assume you’re compliant with state and local laws and you have that on your side with Cole rules, which should let you sleep easier. Second, they should provide you with some level of personal protection, at least in the normal business liability sense. Obviously incorporating doesn’t magically make you federally legal and I am not suggesting that it does.
This is a business, treat it that way.
#3 – Get a business address for your corporation.
If you have a dispensary, you have a business address. If you run a mail order CBD business, or a delivery service, spend the money and get a business address, no matter where you actually work. Whether it’s a PO box, or an account with a co-working or shared office space that has mail acceptance and forwarding, spend the money and get the address sorted out properly.
Again, act like it’s a business, because it is a business.
#4 – Domain name, website, email address.
Buy your own domain name and register it to your business, using your business address. I don’t care if you want to use Wix, Weebly, Squarespace, WordPress or whatever, DO NOT GET A DOMAIN NAME VIA THEIR SERVICE. If your domain name is listed with anyone but your business as the owner, you are wasting your time and money.
Set up your business email address at your own domain. If you need to forward it to Gmail, Yahoo (please, no!), or some other address, go ahead, but make sure you receive emails when they arrive.
Trust me on this one. It’s non-negotiable.
#5 – Make sure you get some postal mail at your business address.
Get a utility bill, phone bill, that type of thing set up at this address, you’re going to be ahead of the game. If you can’t get something like that, have your vendors send their bills to this address.
#6 – Get a business phone number.
Google Voice gives out free phone numbers and you can forward them almost anywhere. If you don’t have a physical location that has phone service, then get a Voice number and forward it to your mobile phone.
You can set up the caller ID for incoming calls to show the business number as the one being called, and you can answer the phone like a proper business… using your corporation name. See #2 if you have already forgotten about the corporation name stuff.
#7 – Get your business license, good standing certificates, and any other proof that is needed in your location to demonstrate that you’re running a compliant business in that location.
Nobody likes keeping a ton of paperwork around, so do yourself a favor and make scanned copies of what you can. You’re going to be using these scanned copies to submit applications and forms and all that good stuff down the road; having a nice folder in the cloud somewhere that you can easily access all it will make your life so much easier.
BONUS TIP: Don’t forget to put a copy of your articles of incorporation, any amendments or other docs pertaining to your corporate structure in this folder as well.
#8 – Get your EIN (tax ID) number from the IRS for your business.
Do not transact business on your Social Security number, even if you are a sole proprietorship. You need to grow your business legitimately, just like you would a shoe store, or a meal delivery service, or a hair salon. Again, non-negotiable, so get with the plan and just do it.
#9 – Personal proof of residence.
This might seem odd, and it’s unlikely that you’ll need it to set up a checking account at the bank. You will, however, be required to provide it (along with a copy of your valid driver license for US transaction processing, or a valid passport for international transaction processing) in order to create and use any merchant banking options. (More on this in our next installation)
#10 – Trademark, service mark applications or awards.
Yes, I know that you can’t trademark marijuana right now. But you can trademark other things with your logo (and we’re going to have an upcoming article written by one of the top patent & trademark lawyers in the country addressing this situation), and if you are in the process or have completed it, put a copy of your paperwork in the folder from #7.
That’s the first ten. Not the top ten, but the first ten things you need to do in order to get your cannabis business banking moving in the right direction.
Part 4 will add some more items to your how-to list, and it will give you some ideas about where you want to set up banking or transaction processing.
I’m also going to discuss some of things that you definitely DON’T want to do, and we’ll talk about options like Shopify and Paypal, and what the risks are with those types of setups.