For all the progress made in the medical pot business, a huge obstacle for dispensaries and other cannabusinesses remains: opening a bank account. One would think that a $2.7 billion-and-growing industry would have banks lining up to take its money, but no.
Because marijuana is still a Schedule I drug, bankers can’t get federal protections—such as the Federal Deposit Insurance Corporation (FDIC)—to back them up and mitigate risk. Banks hate risk.
While this makes life difficult for business owners, it has created a minor boon for security companies, which are used to deliver valuable weed or cash, among the other safekeeping services they provide.
“It has created a market for smaller guys like us,” said Mike Julian, CEO of MPS International (a spin-off of its parent, a conventional security service), which specializes in all aspects of cannabiz security.
“But the bigger guys—like Garda or Brinks—aren’t really competitors yet,” he explained. Since they have federal contracts, they can’t be seen consorting with weed dealers, even legitimate ones.
MPS International, which made about $750,000 in 2014, their first year in business, has two armored trucks running deliveries in Colorado and California. They are also ready to go in Washington and have done security planning for clients in Nevada.
While the fiduciary difficulties have been good for security, it’s not so good for ganjapreneurs trying to make an honest buck.
“Definitely it is difficult,” Frank Quattrone, CEO of Pure Medical Dispensary in Denver “There isn’t a banker I know who is going to choose to work with us.”
Running a cash-only business is dangerous, for both owners and their employees. Some of that danger can be absorbed by employment agencies, which are acceptable clients for banks. These middlemen are paid in cash by cannabiz owners, but they then pay the workers with checks or via direct deposit.
In Oregon, the situation is somewhat better.
“We’ve run into bumps here and there early on, but for the most part Oregon is running incredibly smoothly,” Matt Price, co-owner and CEO of Cannabliss in Portland, said. At first, a small bank might take on a dispensary as a client, “but then corporate finds out, and they drop us when they realize it’s a cannabis business.”
Price says that Oregon is blessed to have that rarest of commodities: effective political representation.
“We are lucky to have politicians that represent the people who voted them into office,” he explained.
Portland is indeed fortunate to have Rep. Earl Blumenauer, who has been pressing the federal government to address the banking problem.
“With legal marijuana sales projected to hit $8 billion by 2018, the need for regulators to get this right is as great as the need for access to reliable banking services,” Blumenauer recently wrote to FDIC Chair Martin Gruenberg.
“In addition to obvious business needs, this is a matter of grave public safety,” Blumenauer pointed out.
Until the banking issue is sorted out, cannabusiness owners will be vulnerable, and security companies and armored cars will thrive.