The cannabis industry continues to be plagued by financial hurdles. The federal government has made it challenging for banks and other financial institutions to feel comfortable working with businesses operating in these high-risk industries. Here’s a quick look at some of the most common hurdles and how your business can address them.
STRICT COMPLIANCE & REGULATIONS
Due to its federally illegal status, cannabis-related businesses will continue to face a strict regulatory environment. With many rules and regulations varying by state, the ever-evolving landscape of the industry becomes that much more difficult for businesses to stay on top of safety and compliance issues.
LIMITED ACCESS TO BANK ACCOUNTS
Likely one of the most common hurdles faced in the industry is the lack of access to financial institutions. Many cannabis-related businesses are forced to operate in a cash-only environment as banking partners are hesitant to offer their services. This increases their level of risk since many are holding too much cash on hand and don’t have the ability to deposit into an account for safe keeping. This also limits their ability to process payroll in a traditional manner, manage accounts payable and more.
LACK OF TRADITIONAL FUNDING
Since most traditional financial institutions are unwilling to work with the cannabis industry, this severely limits access to business loans. This requires them to rely on self funding with the hope they can kick start their external fundraising later down the road. In the case that a financial institution is willing to work with them, cannabis-related businesses are generally subject to much higher risk premiums.
INEFFICIENT PAYMENT PROCESSING SOLUTIONS
Major players in the payment processing industry still refuse to work with the cannabis industry for fear of federal prosecution. This means consumers can’t just walk in with their visa card and make a transaction. The same is true for those operating in the B2B space. While some payment processors are getting their feet wet in the industry, they can be inefficient for the needs of the business.
WHAT OPTIONS ARE AVAILABLE TO CANNABIS BUSINESSES?
While these hurdles may seem unbearable at times, there are solutions. Utilizing a partner like OSS can make it possible to secure the banking relationships you’re looking for. Through our network of financial partners, OSS’ team of industry experts can help you build and manage compliance programs, secure banking relationships to fit your needs and assist with all of your cash management needs. Interested in learning more? Contact us below!