There has been a lot written about the issues cannabis companies have with banking in the U.S. Most of these articles talk about cannabis growers and dispensaries having their bank accounts shut down one day without warning. I even wrote one a year or two ago, though a lot has happened in that time. Multiple Michigan banks now openly accept cannabis companies, though they are generally charged a hefty upfront fee as well as monthly maintenance and transaction fees. But that’s not what this article is about. This article looks at banking from the perspective of ancillary cannabis businesses.
You Are Now High Risk
I had been using a certain banking institution for about 4 years. I had 7 total account accounts spanning two businesses as well as personal checking and savings account. Today, I was informed they were all being shut down, right in the middle of the COVID-19 pandemic. The only information I could get from their representatives was that I was “high risk.”
Of course, I knew exactly what this meant. They found out my law firm represented quite a bit of cannabis businesses. The funny thing was, all the branch managers at the locations I would frequent already knew this. I had been talking in depth about the cannabis industry and what I do with several bankers and assistant managers for years. I had cashed checks made out to Marijuana Microbusinesses , a DBA I’ve used for my law firm. They never batted an eye…until today.
I probably should not have been too surprised, I’ve had numerous cannabis clients get their bank accounts shut down. I also have friends in ancillary industries who had their accounts shutdown awhile back. But I never thought my business would be flagged: I had a lot of money with them, good relationships with their bankers, and I was a long-time client. I was obviously mistaken. While many banks are happy to look the other way on this, many are not. My financial institution had seemed like they were totally OK with my business…and then they were not.
What to Do?
The first thing I did was to ask other ancillary businesses where they bank, and I received a flood of responses from my fellow cannabis business owners. After doing some of my own research and talking and emailing with some trusted fellow professionals, as well as getting more than a few helpful suggestions from the Michigan Cannabiz Professionals group, I started to narrow down my choices.
What I found was that there are a number of cannabis friendly banks that would be happy to take my money. Nearly all, however, would only do it for an upfront fee, and many also wanted to charge me anywhere from $50 to $250 a month to have an account with them. After some research, I narrowed it down to two institutions. Both needed to charge me an upfront fee, but neither charged a monthly maintenance fee. At this point, I was happy to pay a small upfront fee as long as it meant I didn’t have to worry about hiding my business from them or live in fear of having my account shut down on a whim. For Michigan ancillary companies, I am more than happy to share my results with you privately—just shoot us a message on our website. For non-Michigan companies, you will have to do your own digging.
Lesson Learned: Your Personal and Business Bank Should Be With Different Institutions
In a way, I was lucky. I had just run my payroll a couple days prior, as well as just paid my rent, so I didn’t have any bills immediately due. However, the timing still wasn’t great—I can’t exactly waltz down to another bank at the moment with the state’s stay at home order still in place and nearly all bank branches being by appointment only. You would think my bank wouldn’t shut people down in the middle of a pandemic, but you would be wrong.
I think the biggest lesson I learned from this is that I really should have kept my personal accounts with different institution. I had them all together, and in the blink of an eye, they were all shut down together. Now if I had my personal accounts with one bank, and the business with another, at least I would have some accounts open I could backstop my business with. But by putting all of my accounts with one institution, I put all of my eggs in one basket.
Putting it All Together
Ancillary cannabis businesses are not immune to the banking issues facing the cannabis industry in general. While we all hope for passage of the Safe Banking Act, until that time comes, all of us in the industry need to be careful with banking, even law firms or accountants that merely dabble in the industry. No one is immune.
The key takeaway for me—and hopefully for those reading this as well—is to spread out your risk. I will likely be opening two business accounts with two different banking institutions. Even though the financial institutions I plan on opening an account with both have said they are OK with my business, I want to exercise an abundance of caution. I will also be opening personal accounts with an entirely separate institution. This way, even if one of my accounts is shut down again, I have a back-up, and a back up to my back-up.
Finally, f#%$ Huntington Bank. Had to get that off my chest.