Marijuana Business Magazine November-December 2019

November-December 2019 | mjbizdaily.com 151 Ancillary cannabis businesses may have an easier time obtaining banking services than plant- touching operators, but securing and maintaining relationships with financial institutions still comes with challenges. Below are some considerations for ancillary companies seeking to establish a banking relationship: • Fewer than 100 financial institutions nationwide are set up to work with ancillary businesses in the cannabis space, according to industry estimates, although federal data suggest the actual number is more than 700. Experts recommend getting referrals or calling around to area institutions to identify the participating banks and credit unions in your state. • Know how much of your business is tied to plant-touching operators in the cannabis space. Large banks will most likely not work with ancillary businesses if more than 20% of their customers or revenue are concentrated among marijuana retailers, processors and/or cultivators. • Be prepared to show financial institutions that you are compliant with state laws and you are working with companies that are playing by the rules. Compliance will help alleviate risk concerns banks and credit unions might have about servicing your company. • Maintain relationships with more than one financial institution, if possible, to guarantee access to financial services and products in the event one of your banks or credit unions decides to no longer work with you. To improve their odds of securing a banking relationship, ancillary operators can work exclusively with licensed cannabis companies, create a professional presence and be upfront about their needs, according to industry executives. Ancillary businesses can also take steps, such as banking at multiple institutions, to ensure they’re not left without access to deposit accounts. There’s a myth that banks and credit unions absolutely won’t work with the cannabis industry. But ancillary companies that don’t touch the cannabis plant or products often can access accounts from financial institutions, said Tyler Beuerlein, executive vice president of business development for Hypur, an Arizona firm that provides services and technology to banks that want to work with cannabis companies. “Ancillary companies have a number of options throughout the country that will take accounts,” said Beuerlein, who also serves as chair of the National Cannabis Industry Association’s banking and financial services committee. “Some larger regional institutions are actually targeting those (ancillary) operators. They don’t want to bank plant-touching operators, but they’re actively looking to increase their deposits, so this is an attractive way for them to do that.” CHALLENGES PERSIST Finding a banking partner isn’t without its challenges for businesses that supply cannabis companies with equipment such as grow lights, software, legal advice and other goods and services. Data released by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) shows the number of banks and credit unions actively banking marijuana-related businesses has increased steadily, reaching 715 institutions at the end of the second quarter of 2019, up from about 400 in early 2018. (See chart on page 152.) But Beuerlein believes those statistics overstate the true number of depository institutions openly banking cannabis businesses. He estimates that fewer than 100 of the more than 4,000 commercial banks and 5,000 credit unions in the United States are set up to work with ancillary companies. Financial institutions might be averse to banking cannabis companies for a variety of reasons. Perhaps the biggest consideration is the risk banks and credit unions could expose themselves to with an industry that is still illegal in the eyes Most financial institutions remain leery of providing checking and savings accounts as well as loans to ancillary cannabis companies—even as more states adopt recreational and medical marijuana programs. Tyler Beuerlein is executive vice president of business development for Hypur and chair of the National Cannabis Industry Association’s banking and financial services committee. Courtesy Photo