Cannabis companies using services from Paychex Inc. PAYX have been notified that the company will no longer process direct deposit payments or offer other services to them starting May 1, reported MJBizDaily.
“Paychex has worked diligently to provide as many of our services as we can within the parameters established by our banking partners. Unfortunately, we can no longer provide you with some of the services you are currently receiving from Paychex,” according to a memo obtained by the outlet.
Rather than electronic or automated services, Paychex is offering manual services to clients such as signature-ready checks or net-pay amounts for clients to write checks themselves.
Chris Lagana, a New York-based marijuana industry consultant told Green Market Report that he’s convinced Paychex’s cannabis exit is connected to last month's failure of Silicon Valley Bank (SVB).
“(Paychex) did have banking relationships with SVB. I don’t think that’s any secret. And I know they moved most of their cannabis companies through SVB,” Lagana said.
Paychex’s exit from the cannabis industry will affect many operators that are already struggling. Numerous companies have had to implement cost-saving measures in recent months, many of which resulted in mass layoffs. Finding a new payroll provider is yet another problem they don't need. But it seems Paychex's competition is eager to seize the moment.
Case in point, Tyler Beuerlein, chief strategic business development officer at Safe Harbor Financial SHFS put the word out on LinkedIn: “I’m hearing Paychex is exiting the cannabis space. That has to be frustrating for many operators throughout our industry. If you need help feel free to reach out as always.”
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