The federal government has lagged behind the states when it comes to cannabis policy, resulting in the much-discussed (but also much misunderstood) cannabis banking problem. Maybe you’ve heard the usual narrative: Because cannabis is federally illegal and banks are federally regulated, the cannabis industry has no access to the banking system and operates entirely in cash, making businesses and their customers all targets for criminals. It makes for a great story, but there’s just one problem – it’s not true.

The actual story is a bit more complex. In an annual survey of cannabis business owners, nearly three out of four reported having a bank account as of last year. That certainly qualifies as underbanked – but it’s a far cry from being unbanked. In reality, deposit banking services are being provided by a handful of enterprising financial institutions who are willing to take a risk to be part of an emerging industry. These banks and credit unions must go to great lengths to comply with existing regulatory guidance, and many turn to specialty technology companies like Abaca for help in meeting this burden. 

It is true, however, that the vast majority (over 95 percent) of banks still refuse to work with cannabis businesses. This includes the largest banks as well as the major credit card networks, greatly complicating both how cannabis businesses handles payment logistics and how they access capital, two very critical functions. Despite these hurdles, the growth of the market has been tremendous, achieving compound annual growth rates in excess of 20 percent in each of the last several years in a trajectory that mirrors the growth of the broadband internet industry in the 1990s.  

With that kind of growth, and the kind of capital that accompanies it, it seems a foregone conclusion that some change in federal law is coming. The question has become less about if or even when we will see some kind of meaningful federal cannabis reform, but how. The industry, however, isn’t waiting around, and neither are the companies that provide the industry with banking, payment processing, and access to capital.  

Abaca is working with local banks to enable these important services for the cannabis industry today. By working with Abaca, cannabis businesses can have access to FDIC-insured bank accounts (not pooled accounts with other businesses) at local institutions, enabling them to pay vendors, employees and others electronically and even to accept debit cards and other forms of electronic payment at their businesses.  

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Cannabis has been called the industry for the “one percent” because of how difficult it can be for business owners to get the capital they need. Fortunately, companies like Abaca are working hard to solve that problem, too. Abaca’s network connects cannabis businesses with the capital that they need – everything from real estate/mortgage loans to equipment financing and lines of credit.  

So, to everyone preparing to enter the cannabis industry, my message is this. You CAN get a bank account for your cannabis business, and you may even be able to get a loan too. You just have to know where to look.

Dan Roda is an attorney and is the cofounder and CEO of Abaca, a fintech company that connects cannabis businesses with banking, payment processing, and lending. Email him at dan@abacabanc.com.

Download Abaca’s Cannabis Compliant Banking Guide