Most individuals think that when there is cash held up in a vault, it will cause huge problems. That is what many cannabis business owners have to do because of the lack of access to cannabis banking institutions.
There are real concerns by consumers, the industry and the government at large because of public safety; in addition to the fact that the industry would be more difficult to track and would be more feasible for illegal market distraction and also money laundering. Because of the lack of cannabis banking services for cannabis-related business owners, there are so many more implications that need more attention – but don’t get it.
Limitations and Restrictions
Cannabis banking services are limited and restricted for so many entrepreneurs. For the wealthy person, it might not be that hard. However, for the most part, business owners have to relatively endure major roadblocks including accessibility to cannabis banking services. The average business owner has to worry about the feds and whether or not, they will hear a knock on the door of the business to be allegedly accused of illegal banking services. It is because of the War on Drugs that business owners are afraid to put all their money into a federal bank.
The Dollar Signs
In addition to limitations and restrictions, business owners have to consider the cost of running cannabis-related businesses. Some of these costs include the startup, the licensing fees, the application cost and inventory purchase. Most people will spend up to six million dollars to start a business like this. Even if you were to open and operate a retail cannabis dispensary, our break-even cost could run up to two million dollars. If you wanted to consider cannabis banking to get a loan to foot the bill, it would be almost impossible.
In other industries, if you were a small business owner, you would just go on over to your local bank and inquire about a business loan to help with the funding of your business build out. The loan would also take care of your initial operating costs. In such a scenario, the person trying to open a small business would retain ownership of this business. Once the business has been opened, it will use the cash flow to get the bank loan paid off. In contrast, the cannabis business is not as easy. If you don’t have access to the traditional way of getting a business loan and you are not already a wealthy person, starting a cannabis business might force you to approach investors and not place any emphasis on cannabis banking. The majority of cannabis business owners will usually rely on investors.
Seek Out Past Professionals
Needlessly, the average cannabis dispensary business owner does not have access to a large network of investors to approach. However, you could approach a past corporate executive or manager that you know who is interested in the cannabis industry as long as you have a solid business plan. Most of these people in high positions will usually have a Rolodex of potential investors. This explains the reason why so many cannabis licensees have difficulty in raising capital for their business instead of choosing the traditional cannabis banking services. In 2014, for example, some of the licensees approved have still not opened up their retail business even today as a result of not being able to find six million dollars start-up costs. This shows the heavy deficiency that exists in cannabis banking and how it impairs the average business owners.