Cannabis is one of the biggest businesses around right now, and for good reason; recreational legality in 11 states and DC, and medicinal legality in 47 states make it poised for a huge boom. Additionally, cannabis businesses will never run out of demand, especially now that legality is increasing at a rapid pace.
With so many reasons to invest in and open cannabis businesses, however, there are persistent rumors that squash many entrepreneurial dreams. We want to keep those dreams of owning a cannabis business alive by dispelling these myths once and for all.
It used to be quite difficult to secure investment money for cannabis businesses, even in the most open states like California or Colorado. As time has marched forward, however, more lenders are getting on board with cannabusiness and these businesses are opening themselves up to stock investors as well.
But the federal illegality of cannabis products makes many people wary about buying stock in these companies, and it can make owners stop short of selling stock. Truthfully, however, you can buy and sell cannabis stock, even if you're in a state where it's not legal. While some brokers might not want to deal with cannabis stocks, it's not strictly illegal, so don't let this myth dissuade you.
This was true a decade ago, but now it's significantly easier to secure lending from banks and credit unions. In fact, local credit unions are far more likely to loan to a local cannabis business than a large-scale bank that probably has more federal scrutiny heaped upon it.
The fear comes from the fact that cannabis is still illegal at the federal level, and since banks are FDIC insured, they could be sanctioned for "illegal lending practices". In theory, this is true but it's simply not likely, and so this fear sits largely without teeth. Every year that more states legalize recreational use of cannabis, the lending industry views these investments more favorably, which is good news for cannabis startups.
Having a corporate bank account is different than being lent money to open a business, and while it was incredibly difficult for cannabis companies to get business accounts before, that has largely gone by the wayside.
The main reason why bank accounts weren't available was ill-defined business legality, in the very beginning of legalization. As more states open themselves to cannabis legality, there exists more direction towards a stable method of taxing and tracking cannabis sales. This makes banking far less problematic and it's basically a non-issue at this point.
Unfortunately, just because you have a business account and lenders are more friendly towards cannabis doesn't mean that credit and debit card systems are. No major credit card company will process cannabis-related transactions, and this includes debit transactions as well.
Many dispensaries and other places of business require cash-only transactions, or they get around it by hiding the true nature of their transactions, but this is highly illegal. Others—and this is the better choice—set up and stock ATMs within their business or just outside. This way customers can readily get cash to pay but don't have to approach the business with hundreds of dollars in their wallet.
Trends will continue to look more favorably on cannabis as more states legalize, and eventually, market pressure will force credit card companies to get on board or miss out on tremendous revenue potential.
Posted by Canna Business TeamFacebook
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