As if running a small business wasn’t hard enough, CannaBama owner Jennifer Boozer has concerns other shopkeepers don’t have to stress about. In addition to sales, payroll and other worries about day-to-day operations, Boozer doesn’t always know if she’ll be able to process credit card payments.
This issue arises not because she’s missed a payment or because she has bad credit. It happens sometimes because she sells legal cannabis products in the U.S.
“It’s at a catastrophic level,” Boozer said about the way banks treat the cannabis industry. “I can’t get a business credit card. I can’t get lines of credit.”
Boozer, whose business has been open for four years in downtown Mobile, has on two separate occasions lost the ability to process credit card payments, called merchant services, because of skittish banks unwilling to take a risk on a CBD business.
CannaBama was given merchant services through BB&T when it first opened in 2018, Boozer said, but those were taken away in February 2020 because of unrelated issues involving a different store she doesn’t own.
“I lost $12,000 in sales and then [the COVID-19 pandemic] began,” she said. “In May of 2020, BB&T closed my accounts because I sold edibles, but so do all CBD stores.”
While searching for a better banking relationship, Boozer said, she was turned down by 12 other institutions and lost $200,000 in the process.
This continued, she said, until she got with Bryant Bank, which allowed the store to get back to business. However, Boozer could still not take out affordable loans or get a business credit card, she said. The hesitancy of banks to provide services to Boozer’s business is preventing her from doing things she’s wanted to do, but it could be worse. She said the issue is a national problem and many cannabis businesses are “cash only” to this day, which means owners open themselves up to robberies and thefts that might not happen if they could use the same banks for the same services everyone else does.
Chey Garrigan, executive director of the Alabama Cannabis Growers Association, said the issue of whether to provide services to businesses in the industry is up to individual banks, but a lot of the larger banks won’t do it because of the risk it poses, she said.
“It’s on a case-by-case basis, but the word ‘cannabis’ might be enough to shoot [a loan application] back,” she said.
In addition to an impact on the business and owner, individual employees at cannabis dispensaries could have a hard time even getting bank accounts, Garrigan said. The hesitancy on the bank’s part has to do with the fact that cannabis businesses are still dealing with something considered an illicit narcotic by the federal government.
“It’s a personal preference,” Garrigan said of the banks’ decisions. “We’re still dealing with a Schedule 1 illegal drug. It’s up to you if you want to take the risk or not.”
Because the drug is still illegal federally, it gives banks pause, said Jason Lybrand, a partner at Sovereign CPA Group. Banks are federally allowed to provide services to those in the cannabis industry, but the protections and liabilities are different because the substance is illegal and many banks shy away from risk.
For cannabis businesses hoping to participate in banking services more easily in the future, help could be on the way in the form of federal legislation, Lybrand said. The so-called SAFE Banking Act would relieve some of the risk exposure banks face when lending to a cannabis business; therefore, it would make it easier to do so.
The idea behind the act has been in Washington, D.C., for years, Lybrand said, but with this “clean” version having no real policy hurdles attached, advocates will have to wait and see what happens.
The bill just passed the U.S. House, which it has before. It’ll head to the Senate, where its future is murkier.
The House version of the bill had wide, bipartisan support, as it passed with 321 “yes” votes and 101 “no” votes. All 215 Democrats who participated in the vote moved to approve it, while 106 Republican members voted for it.
The Alabama delegation was split in support of the measure. Mobile Republican Jerry Carl and Republicans Robert Aderholt and Gary Palmer voted “no,” while Republicans Barry Moore, Mike Rogers, Mo Brooks and Democrat Terri Sewell voted “yes.”
Alabama Banking Association Executive Director Scott Latham said the group supports the federal legislation and thinks it’ll help banks in the future.
“As an industry, we find ourselves just needing somebody to say this is what needs to be done,” he said. “Right now, there are conflicting requirements and banks need guidance.”
Latham said the banking industry in the state understands the issues facing cannabis businesses, but with the way the laws are now and with cannabis being illegal, “it ties our hands.”
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