Opening a Cannabis business and Banking Issues
Recently, the cannabis industry in Colorado Springs CO was given permission by the state legislature to open up its cannabis market without profit from cannabis stores and sales tax. The passing of this bill allows marijuana retailers to be operated like traditional retail outlets. However, cannabis retailers will be limited in the amount they can sell per day. The new cannabis sales tax takes effect on January first, so banks need to begin discussing the implications of the new law with their clients now.
There are a number of factors, banks will need to consider when setting up cannabis sales and banking businesses. Firstly, the new tax structure will likely change the way people deposit their money. Until such time, the banks will be limited in the amount they can lend and still collect interest from their clients. Secondly, there is an important distinction between being a cannabis retailer and a cannabis business.
The cannabis retailer will need a valid ID and bank account. Additionally, a person cultivating, distributing, or selling CBD may also need to show proof of a medical cannabis license. Under legislation proposed in Colorado, starting cannabis businesses would not require anyone other than the owner to do business with them. However, under the proposed act, starting cannabis businesses would require both ID and cannabis banking access. This would likely be problematic for smaller operators who are attempting to set up as Mom and Pop operations without relying on the more established sector.
If banks do not offer this type of financial service for the cannabis industry customers they deal with, they could lose out on revenue. Many of the larger banks in Colorado Springs have already moved some of their operations to Denver because of the cannabis industry’s boom. With the possibility that recreational cannabis users will see increased sales and usage and the fact that marijuana users can buy their own products at neighborhood retail outlets, there is a tremendous opportunity for small businesses to provide this type of financial service. In addition, the prospect of using the cash generated from cannabis sales for personal use is just too attractive an option for many traditional banks. In fact, many banks already accept major credit cards for small amounts, and some allow cannabis retailers to take credit card payments.
Many of the largest financial institutions in the world are still slow to adopt this new technology. Marijuana is still considered to be illegal according to the federal government, and banks are not allowed to make loans to people who are engaged in the cannabis industry. Nevertheless, the federal government has not publicly stated how they intend to regulate this new industry. Most experts agree that it is highly unlikely the U.S. Federal government will intervene in the growing marijuana industry. However, local cities and counties are taking steps to ensure they do not fall afoul of the cannabis industry, and companies involved in this industry should consider these options before moving their business into cannabis.
A number of marijuana business owners are taking advantage of their local options and accepting credit cards from local pet shops to help finance their ventures. While this is a perfectly legitimate practice, cannabis businesses should also look to other financial services companies to help them accept credit cards for cannabis businesses. Some companies may have existing relationships with local cannabis shop owners or may even have plans to start such accounts. By partnering with local businesses, cannabis businesses can greatly increase their chances of gaining a favorable business account with a leading financial services company.
Another option for cannabis businesses looking to obtain an account is to create their own bank. Although it may sound like an appealing idea, creating your own CBD bank can be difficult because CBD is not yet accepted at any nationwide level. However, many major national companies are taking notice of the new trend of CBD-infused products, and some of them are looking to partner with small cannabis businesses to offer customers an even wider range of products to choose from.
The federal law against cannabis does not prohibit local governments from providing financial services to cannabis users. In fact, some cities, such as Seattle, have already taken steps to implement regulated cannabis retail shops. Other states, such as Colorado, have taken steps to legalize marijuana. Until federal law changes, banks that provide services to cannabis users must adhere to state laws.