Ri$ky Business: What do you do with $20B if the bank won’t take it? That’s the question US cannabis companies face every year

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“We are required to take a lot of cash and cash is expensive to handle, it’s cumbersome, and it creates a whole other boatload of challenges,” said Meg Sanders, CEO of Canna Provisions, a cannabis company in Massachusetts, in a revealing interview this week with the Wall St. Journal (below).

The problem is that when the feds see a cannabis company they see an outlaw. That’s because of Richard Nixon’s Controlled Substances Act (CSA) which placed every illegal drug in the country into 1 of 5 categories, or Schedules, as they’re called, going from the most dangerous – Sched 1 – to the least dangerous – Sched 5.

Schedule 1 includes heroin, peyote, LSD, ecstasy – and cannabis. The less dangerous Sched 2 has cocaine, meth, oxy’s, and fentanyl, among others.

As we know, if you bring a duffle bag full of money from your cocaine business to a bank for deposit and are caught, both you and the bank are subject to prosecution.

And that’s exactly what scares federally regulated institutions such as banks and credit card companies about cannabis firms: according to the CSA they can no more offer services to them than they can to a cocaine company. Or they risk prosecution even if the company is properly licensed in one of the 30 states that have either legalized or decriminalized cannabis for recreational use, or one of the 37 states that have legalized it for medicinal use.

So people like Meg Sanders have had to figure out workarounds to take care of their cash: they hire employees whose sole job is to handle it, hire security to protect against robbery, or hire an armored car service to transport it to some other secure location or to a regional bank or credit union – if they can find one.

And if they do, they have to watch out for another kind of robbery – predatory banking practices. Because the lender knows they’re the only game in town they can charge interest on startup capital that’s extremely high – 20, 30, 40% on loans valued in the hundreds of thousands or even millions, according to the WSJ report, and monthly service charges as high as $10k. Which makes it especially hard for poor and minority communities to get a seat at the table. “The challenge with it is you end up giving a pretty big chunk of your company away to get your company financed,” says Meg Sanders.

There’s a way to stop the bleeding: Last month the US House of Representatives passed the Secure and Fair Engagement (SAFE) Banking Act which would allow any financial institution, state or federal, to render their services to businesses in the cannabis industry. To become law, though, it has to be approved by the Senate and signed by the President.

The financial problems the bill seeks to remedy are huge – and getting bigger: According to the WSJ, American cannabis companies collected $20B in 2020, projected to double over 5 years.

As Meg Sanders puts it, cannabis companies simply want a level playing field: “We need all the services that most businesses use, we just want to operate like a normal business.”

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