How To Get A Bank Account For Your Cannabis Business

The very real challenges the cannabis industry faces when trying to access financial services has led to a misconception that cannabis-related businesses (CRBs) simply can’t get bank accounts. While it’s true that many financial institutions (FIs) aren’t yet ready to bank the industry, a growing number of banks and credit unions are.

So why is it so hard to get an account for your cannabis business?

The short answer is because cannabis banking is risky for financial institutions and bankers are committed to avoiding unnecessary risk.

That’s not necessarily a bad thing- unnecessary risk in home lending directly contributed to the 2008 financial crisis, for example. Further, FIs have historically taken pains to keep funds associated with illegal activity out of their institutions which got an even stronger spotlight after new anti-money laundering regulations were implemented as part of the PATRIOT ACT in 2001 to combat the funding of terrorism. That means that one of an FI’s primary obligations is to make sure that illicit money doesn’t enter the US financial system. Due to marijuana’s status as a Schedule I Controlled Substance, many FIs are unwilling to take on the additional reporting and oversight responsibilities that came along with the PATRIOT ACT.

There are, however, many banks and credit unions out there that now readily bank cannabis businesses  and support the transparency that goes along with bringing cannabis banking out into the open. However, this isn’t a decision they typically make lightly, and it often takes a while for progressive FIs to shift their culture away from seeing CRBs as an unnecessary risk.

This is part of the reason why it can be hard to find a cannabis-friendly bank. With few exceptions, FIs are discreet about their cannabis banking programs, and you won’t find them issuing press releases or advertising these programs on their websites (though that has started to change over the past year). A cannabis operator can be forgiven for thinking that there are no options available to them, but at Green Check we know from experience that there are banking options. 

As you start looking, do not start with the big national banks. Yes, you may have a friend that’s actively banking with one of them, but it’s not a question of whether the account will be closed as much as a question of when. Look instead for credit unions, community banks, and regional banks. Look to who’s in your neighborhood. We’ve seen a financial institution start a cannabis program because the owner of the dispensary two doors down reached out to see if they’d be willing to work with them.

A Google search isn’t likely to help you locate a cannabis-friendly bank or credit union, so networking is key. Reach out to lawyers, accountants, and bookkeepers in your area.  If they are representing or working with other local CRBs, they may well know who they’re banking with or know someone who does. Additionally, Green Check works with cannabis-friendly institutions in every legal state, and you can always contact us to connect you with a bank or credit union that’s the right fit for your business.

So what can you expect from a financial institution with a cannabis banking program?

The pioneering FIs that first started banking the industry were exceedingly cautious in what they offered (notice a trend?) and it was relatively unusual for them to offer a CRB more than a standard small business depository account, i.e. a place to store cash but little else. However, we’re seeing a new phase of cannabis banking where financial institutions are offering more than just a place to park cash. Some are starting to offer loans, payroll services, business insurance, etc., so it’s worth looking around to see what’s available out there. You might find the new range of services comparable to business services for non-cannabis businesses.

As you navigate your banking relationship, you may find higher fees than you would for a non-cannabis related business or personal account. This is because FIs need to do a lot to make sure that they’re only banking state-legal CRBs, from collecting and reviewing point of sale transactions to meeting rigorous federal and state reporting obligations specific to marijuana-related businesses. This means FIs often have to hire additional staff to meet their compliance obligations and invest in software to automate some of their monitoring requirements. FIs make a big investment in banking cannabis, and account fees help them offset these expenses. This means that you might pay an account application fee and a monthly account maintenance fee to help cover these costs.

Account fees have certainly come down over the past few years; gone are the days of paying $5,000 a month for a simple deposit account. In 2023 we actually saw market pressure push a couple of FIs in a particularly active adult-use state to drop their account maintenance fees entirely! However, that remains an exception to the rule and fees will remain significant as long as there is a significant monitoring and reporting burden placed on FIs.

What should I bring to a meeting with a bank or credit union?

Every action taken by an FI is heavily scrutinized by state and federal banking regulators and law enforcement agencies. They want to make sure that banks and credit unions are only banking state-legal, legitimate CRBs.  Therefore, you can expect an FI to ask at a minimum for some combination of the following:

• Driver’s license or other acceptable state-issued identification for all account holders
• Information about all beneficial owners of the business, not just those that own a percentage of the business above a certain percentage threshold (like 20%)
• Previous year’s tax returns both for the business and the beneficial owners
• Financial information like profit and loss statements and capitalization tables
• A copy of any required state licenses
• Operational data like expected annual sales and patient/customer counts
• Business formation documents like articles of incorporation and a business plan
• Sales transaction data - point of sale reports or invoices - for the past thirty days

At this point you may be asking, why would anyone go through this whole process? Why not just avoid it all and stick with the account you have with Chase or Bank of America? If you just tell them you’re a florist, you should be good, right?

Nope.

FIs are becoming far savvier about detecting cannabis related business activity among their existing customer/member accounts. At this point, it’s not a question of “if” your financial institution will find out you’re a CRB, it’s a question of “when”. Few things are as disruptive to a business as getting a letter from your FI informing you that your account will be closed in thirty days. Don’t put yourself in that position.  Additionally, you may be missing out on vital financial and business services by staying “under the radar” and not having a transparent relationship with your bank or credit union.  

Start looking for a cannabis-friendly bank or credit union today so that you can get the dedicated support your business deserves. If you need help finding one, Green Check will be happy to make an introduction. 

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This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.