Cannabis Banking Is a Matter of Public Safety
Seth A. Goldberg, Duane Morris
Let’s say ABC LLC applied for and was granted permits to grow, process and dispense cannabis pursuant to its state’s medical marijuana regulations. ABC now operates a 120,000-square-foot cultivation facility and sells its cannabis-related products, which include THC and CBD vape oils, tinctures and pills, through three dispensaries. Because, as discussed below, marijuana is federally unlawful, ABC has been unable to obtain a bank account with a commercial bank. ABC’s workarounds to not having the same access to capital and daily banking services hinder its business and raise issues of public safety in ABC’s local communities.
To build its cultivation facility, ABC needed $20 million to finance construction. ABC was unable obtain a traditional construction loan from a commercial bank; prevailing interest rates for such loans were approximately 4.5 percent. ABC was instead forced to privately raise capital. High net worth individuals stepped in and agreed to finance the construction at an 18 percent interest rate, with a portion of the debt convertible to equity upon the achievement of certain licensing and sales milestones. ABC’s founders will lose everything if ABC does not succeed, and their ownership of ABC will be diluted even if it does.
Daily sales at each of ABC’s dispensaries average $8,000 for cannabis-related products, and average another $2,000 in merchandise. Having no credit card processing capabilities, ABC is paid in cash for all of its products. The cash is stored in safes inside each dispensary, and every Saturday approximately $150,000 is carried out of the dispensaries in duffel bags and driven to the home of one of the dispensary’s owners. There the cash is divvied up to pay ABC’s owners, 40 employees and various accounts payable, all in cash. The risks to physical safety resulting from dealing with such large amounts