Seed Money: A Guide to Cannabis Banking for New Dispensaries

For years, one of the biggest bogeymen hanging over the legal cannabis industry was the lack of access to basic banking services. Because lenders and financial institutions were leery of running afoul of federal anti-drug laws—so went the wisdom—dispensaries and other cannabis businesses were forced to operate on a cash-only basis.

To an extent, this fear was justified. When California inaugurated the nation’s first medical cannabis program in 1996, there were no banks willing to work with the cannabis industry. But by 2014, the landscape had changed dramatically.

Because it was obvious that cannabis was not only hugely popular but a potentially massive source of tax revenue and jobs, the Obama administration signaled in that year that credit institutions were free to service the industry.

Since then, of course, the cannabis industry has become one of the fastest-growing in the country, adding over 77,000 full-time jobs in 2020 alone. Where does that leave us in terms of banking? Despite the persistent misunderstanding that banks refuse to work with cannabis businesses, in reality, the situation is far better than it was a decade ago. For one thing, the House of Representatives acted by passing the SAFE Banking Act (again!). And for another, a California-based trade group—the CCIA—is leading the way by brokering a historic deal with a North Bay credit union.

But that’s not to say finding a bank is exactly straightforward. If you’re a new dispensary looking to get your financial house in order, start here, with this guide to basic cannabis banking.

Guide to Cannabis Banking for New Dispensaries: How to Find a Broker

While some hurdles to basic financial services remain—many dispensaries are still forced to handle large amounts of cash—the picture is rosier than it was. As of April 2021, over 500 banks and roughly 170 credit unions work with the cannabis industry in a transparent and legal manner, according to the Financial Crimes Enforcement Network (FinCEN). The trick is that not all these banks work with all sectors of the industry, and not all of them actively advertise this fact.

How do you get connected with a cannabis-friendly bank? One method is by working through a broker such as Fincann. The service, which bills itself as “The Cannabis Banking Authority,” charges dispensaries and other industry players a premium to be connected to cannabis-friendly banks and lenders.

Is paying a broker worth your time? That depends. If your value your time more highly than your money, the answer might well be “Yes!” Why? Here’s an example: FinCEN (the federal agency) tabulates its tally of cannabis-friendly banks in a way that allows discrepancies and inaccuracies. That’s where we sourced the figure of “over 500 banks and roughly 170 credit unions.”

By comparison, Fincann (the cannabis banking broker) counts fewer than 300 banks that actively service the cannabis industry. If you spent your work week approaching a bunch of “cannabis-friendly” banks that didn’t actually serve the cannabis industry, that’d be a large (and frustrating) waste of your time.

If you’re interested in trying this brokered approach, you can find a limited directory of cannabis banking institutions and brokers here.

Guide to Cannabis Banking for New Dispensaries: How to Find a Bank

Another way to connect with banks is to let your fingers do the walking: Simply search banks in your state and cross-reference “cannabis.” Sounds easy, right? Unfortunately, this will involve a little more brainwork than you might figure.

For one thing, things move quickly in the cannabis world, and information may be out-of-date or inaccurate. Some smaller banks—such as Oregon’s MBank—jumped into the cannabis banking game early, only to discover that they lacked the resources to handle the necessary compliance, much to their dozens of cannabis clients’ disappointment.

And as we mentioned earlier, there’s the fact that many cannabis-friendly banking institutions don’t actively advertise this fact. Again, this leads to incomplete or difficult-to-verify information. While a few online lists of such institutions exist, they tend to be scanty.

Should you steer towards a credit union vs. a bank? Historically, credit unions have been more open to taking on cannabis clients, as demonstrated by California’s North Bay Credit Union, which has made a point of actively soliciting cannabis industry clients. But there are downsides: Credit unions tend to have fewer commercial services, as well as more limited access and customer support options than commercial banks. Still, depending on your location, it may be your only option, at least until the Senate (fingers crossed) passes the SAFE Banking Act.

Guide to Cannabis Banking for New Dispensaries: Tips for a Smooth Transaction

No matter which route you pursue, you can set yourself up for success by getting your financial house in order before you even meet with a broker, a bank, or a credit union representative. Steps to take include:

  • Seek valid guidance from someone familiar with cannabis banking. As we pointed out earlier, managing compliance can be a major hurdle for smaller institutions. Make sure that any bank or credit union you approach is fully prepared to tackle this potentially sizeable hurdle.
  • Prepare all your financial documents ahead of time. This should be a no-brainer, but you’d be surprised. If your dispensary is already up and running, gather all relevant data from your POS system so that there’s no scrambling for answers when you need them. 
  • Be transparent. A good relationship is based on honesty. Have all documentation of legacy cash or other financial details, and don’t hold anything back. Be sure you know and understand every detail of your business’ finances, and be willing to share this information freely and honestly.

If you’re new to the industry, make sure you also understand 280e so you don’t get surprised come tax time!