Follow the money: Finance and banking issues for cannabis entities

Funding sources and banking services are a necessity for every business. However, cannabis-based entities can find this aspect of operation challenging since cannabis is still illegal on the federal level and financial institutions may be unwilling to work with them. Since many cannabis companies are cash based, there are stringent requirements to follow in addition to existing banking regulations when serving these entities and banks must be aware of the risks involved and understand how to mitigate them.

ALM Global recently released the sixth course in its Cannabis Insurance Coverage Specialist (CICS) designation, Banking and Cannabis: Best Buds or Up in Smoke?, which addresses a number of financial factors affecting legalized cannabis and cannabis-related businesses. There are multiple “gray” areas surrounding how a product is identified. Is it hemp? Is it marijuana? Both are considered cannabis, but the concentration level of a cannabinoid known as Delta-9, the controlled substance that creates the euphoric “high” for users, varies significantly in these two substances and affects how financial institutions work with entities selling these products.