When Michigan legalized marijuana for recreational use in 2018, the cannabis industry opened for business. Unfortunately, not everyone was on the same page; the federal government still considered marijuana a Schedule I drug, creating serious obstacles for cannabis businesses.
Today, cannabis businesses still struggle to find access to banking. Legislators recognized this conundrum and addressed it with the Secure and Fair Enforcement (SAFE) Banking Act, which was passed in April of 2021. In short, the US government still considers marijuana to be in the same class as other addictive narcotic agents. However, it will no longer pursue trafficking or money laundering charges against banks that offer services to cannabis businesses.
This change makes it easier for Michigan marijuana companies to secure bank accounts, but they still face issues with some financial institutions that are slow to recognize their legitimacy. Is your cannabis business in this difficult position? The following suggestions can help you find a bank that understands the pressures of this growing industry.
Start with a Qualified Accountant
Before you do anything else, find an accountant who understands the intricacies of cannabis legislation. Without a knowledgeable expert looking out for you, you may have problems with more than just banking. A certified CPA who works with cannabis businesses should also know about the complexity of taxes in a cash-heavy industry and how to manage bookkeeping, audits, and payroll concerns until you can find a bank and establish a relationship.
Keep in mind that cannabis laws can often change on local, state, and federal levels. Do you have time to run a new or growing business and follow every bill or regulation that affects your industry? Without an accountant who stays on top of these changes, you may leave yourself open for headaches, especially when tax season rolls around.
Search for the Right Financial Institution
You know that the SAFE Act is a new piece of legislation. Even if federal agencies back away from investigating banks that serve cannabis businesses, it may take a while for financial institutions to follow suit. After all, banks are notoriously conservative and averse to risk.
If you find that national banks hesitate to offer you an account, stick with a local one. Credit unions and smaller regional banking chains may be more comfortable working with a fledgling or growing marijuana dispensary.
The number of banks serving cannabis businesses grows each year as more states legalize marijuana in some capacity, but not every bank will advertise this affiliation. You may need to do some research to determine which institutions are open to your industry and what services they offer.
The good news is that finding a bank to work with your cannabis company has never been easier than it is right now. Your accountant may recommend a few local banks that are open to the cannabis industry. Schedule a meeting with several of them to talk about these services:
- Business checking accounts
- Direct deposit and automatic drafts for payroll, utilities, and overhead expenses
- Merchant processing accounts for credit and debit transactions
- Loans and lines of credit
- Online ACH transfers for e-commerce
Without access to a full range of banking services, you may want to keep looking for the right fit for your company.
Prepare for Your Banker Meeting
Any business that wants to establish a banking relationship should take a professional approach. Think of what a difference it can make for your cannabis company if you present yourself as a knowledgeable and legitimate business owner. A banker’s meeting is not the best time to go for a casual, laid-back vibe.
Talk with your accountant about preparing any necessary financial statements, tax information, or other crucial documents that a banker may ask to review. Be frank about what services you want from a financial institution; for example, if you do not need a loan, a banker may see you as financially sound and be more willing to take a chance on you.
Stay on the Right Side
Before cannabis became legalized, it was essentially a black-market product. Now that it is allowed, it’s important to manage your company on the level. Aim for transparency with a potential banker. Gone are the days when you had to lie to your bank to secure an account. Now, thanks to the SAFE Act, you do not have to hide your product, sales, expenses, or profits.
It may seem easier in the short term to pass your cannabis business off as something else, but hiding who you are could jeopardize your financial standing in the long run. Instead, be thorough with your documentation and provide any additional information that a banker requests. It does not hurt to ask for advice from your accountant if you think a bank is demanding more than seems reasonable.
Understand the Risks
Why does it matter whether you have a bank account? Dealing only in cash limits your ability to grow your cannabis business. Most landlords or utility companies do not accept cash for payments; it is not how professional companies interact.
In addition, having a large amount of cash in your storefront or on your person leaves you vulnerable to burglary. With a bank account, you have a paper trail to demonstrate what you received or what someone stole from you. Cash only means that legal authorities can only take your word for what losses you incurred.
On that note, your insurability may also become a concern. Few if any insurance companies want to pay a claim without documentation of a loss. Ultimately, without a bank account, your entire business operation may not function smoothly.
Turn to MI Tax CPA
As you can see, you have a lot to consider before you contact any bank for your cannabis business. That’s why working with our accounting firm makes sense. We can walk you through establishing your company as part of the business community and in the banking realm.
Why try to figure it out on your own when you can have our expertise and support? Call our office at (248) 600-5506 or contact us online to schedule a free consultation. We look forward to helping you succeed in this growing industry.