Marijuana is generating billions of dollars every year.
In 2016 alone, legal sales of medical and recreational marijuana reached $6.7 billion. Up from $5.4 billion in legal sales during 2015. In 2017 we saw even more growth as the market reached $10 billion and employed hundreds of thousands of people across the country. And the trend is projected to continue as more states move to pass marijuana reform.
But that doesn’t mean there aren’t any challenges. Medical and recreational dispensaries, producers, refiners and manufacturers all face significant financial hurdles. The biggest challenge is finding a financial institution that will accept and process their payments. The majority of institutions will close or refuse to open accounts for clients in the marijuana field.
But there is hope for cannabusinesses. While the largest banks won’t work with cannabis there are banks that do. Small banks and credit unions make up a vast network of options that can offer a dizzying array of features. But sometimes finding the relevant information is harder than expected. So below are a few tips to help you find the right institution.
Ensure The Payment Processor Understands Your Business
There is a lot of red tape around marijuana because of its schedule 1 status. It means that any mistake in financial records might lead to catastrophe. Any financial institution you rely on needs to understand the right and wrong ways to submit paperwork or process transactions. If the bank or processing company you are looking at doesn’t, you might be setting yourself up for failure.
But don’t forget that they need to work with your prospective clients as well. It doesn’t help to accept credit cards if none of your clients own the cards you accept. Your financial institution should be able to process MasterCard, Visa, Discover and other options.
Work With A Company That Offers You Options
Modern banking and payment processing institutions have a vast arsenal of tools available to them. And you don’t have to choose a bank that services the cannabis industry exclusively. Payment processors that work with high risk businesses like dating, gambling, and traveling websites often prove themselves a solid option for savvy business owners.
Some of the perks of working with payment processors like this include fraud protection tools, transaction monitoring and chargeback/error protection. They aren’t for everyone but the benefits can outweigh the risks for certain businesses. Just make sure they offer the services you need before signing up with them.
And don’t forget to look for a company that offers solutions to problems such as technical support and website assistance. Most even offer these services 24/7 at no additional cost so you can deal with issues whenever they arise. And beware contracts that don’t have an exit clause or other way for you to leave if things don’t work out.
Avoid Gateway, Set-Up And Monthly Fees
Fees are a part of banking but some are more harmful than others. Gateway, set-up and monthly fees all work to eat away at any potential profit. Because of the volatility of the cannabis market, many institutions charge additional fees to help ensure themselves against loss. These additional and hidden fees build up quickly and can lead to unexpected ruin.
Before signing up with any financial institution, make sure to read and understand the terms and conditions. Because there are a variety of possible local options in addition to internet-based alternatives, there is no reason to agree to these fees. After reviewing the paperwork and checking any applicable CBD merchant accounts, compare the services carefully before finally choosing one for your marijuana business.
Ensure Everything Is Transparent
Ask your payment processing company what strategies they have in place to deal with increased sales and profits. Small companies may be fine processing a couple thousand dollars a month, but put a few thousand dollars a day on them, and they simply can’t keep up. This can lead to them to abandon your business right when you need them most.
But don’t be afraid to start small. Sometimes all you need is a foot in the door to open up real possibilities. A small payment processor or other financial institution isn’t s problem if you don’t have massive or growing income. Unless you sign a long-term contract with no exit clause, you can transfer to a better fitting company when it suites you.
However, financial institutions work best when they are permanent part of a long term solution. And everyone needs to be up front and direct about what their goals are. If the institution isn’t transparent about how their logistics or fees, they will always be a liability to your business. But if they are transparent, payment processors can be a vital part of your financial foundation.
Do you have a tip for cannabusiness owners browsing payment processors? Did a hidden or transactional fee send you into a wild panic? What tips did I miss? Let us know in the comments below!