This article is an excerpt from the SAFE Banking Act: Explained. Download the full report here.
Now that the cannabis banking reform has been removed from competition law, lawmakers continue to discuss how to best drive the cannabis banking reform beyond the finish line on the Senate floor. When legislators discuss the next step, we want our peers to understand that this law does more than just make the lives of cannabis business owners more convenient. It acts as a catalyst for cross-industry development that benefits multiple sectors of the economy as a whole.
We cannot discuss the SAFE Banking Act without acknowledging the spillover effects that the SAFE Banking Act has on the industry as a whole and its partners. If the cannabis bank reform is passed this year, we anticipate these important moves in this area.
“Overall, expect the cannabis industry to continue to grow as the news of the SAFE Banking Act evolves and dedicated cannabis partners step up to keep the industry at a higher standard.” — Ross Sloan, SVP Hemp & Cannabis Banking, Westtown Bank & Trust
Referral network grows
With more ancillary businesses equipped to do more and better businesses within the cannabis industry, we anticipate growth in the number and quality of partners available to stakeholders. Supporting plant-touch and plant-free businesses through financial services creates a powerful web of referral networks. It drives growth at every stage of the industry, from industrial producers finding the right distributors at better prices to retailers choosing better marketing partners to connect with more consumers.
If cannabis bank reform is enacted, banks can expect new customers, vendors can expect stronger demand for their services, and cannabis business owners have greater access to all of their company’s services, vendors and support. Can be expected. After all, the economy of the cannabis business as a whole will grow in both size and strength.
Supply chain bottlenecks may be mitigated
Cannabis and hemp supply chain disruptions are not necessarily caused by COVID, and the industry’s bottlenecks are exacerbated by current legislation, lending practices, and market volatility. Safe and reliable financial services can provide the coveted stability to farmers who provide raw materials that power other parts of the industry to support their businesses at every stage of production. There is sex.
Many farmers planted cannabis crops just a few years ago after the 2018 bill was passed to begin responding to rising cannabis demand. Result: Too many products.
To make matters worse, current legislation prohibits business owners from accessing capital through affordable channels. Companies struggle to get the money they need to get through tight spots, limiting their ability to do business with vendors and suppliers. The lack of guaranteed business discourages farmers from returning to crops that have already disappointed them.
The 2022 SAFE Banking Act reduces the risk of banks lending to hemp and cannabis businesses. Banks can be more flexible in providing loans to midsize businesses. This can support farmers who need more peace of mind to grow more cannabis.
Financial institutions still face challenges from local governments
Even if cannabis is legalized at the federal level, it does not solve the very real problem of involving local law enforcement agencies. Financial institutions still face the risk of creating barriers for state and local governments to serve cannabis-related businesses, regardless of what is happening at the federal level.
Banks are still at potential risk if they are not exposed to the climate of the region and / or do not have a dedicated program to understand the nuances of this ever-evolving industry. What if the state enacts its own legislation that does not directly affect banks but limits the ability of customers to make money with their products? What if a local law enforcement agency seizes an asset without knowing that the customer is a compliant company?
It will still take some time to eliminate all the risks associated with cannabis banking. Unfortunately, this is not in full control of stakeholders. However, you can counter these risks by educating stakeholders, expressing your support for industry legal affairs, and talking to industry leaders to break down the stigma associated with legitimate cannabis business. I can do it.
The spillover effect of the SAFE Banking Act can be felt throughout financial services
Laws like the SAFE Banking Act are expected to create ripples throughout the financial services industry. Banking is just the beginning. The law already provides for increased access to loans and insurance, but we hope that it will pave the way for further innovation in payments and lead to a better experience for both cannabis business clients and financial institutions. Is not so far away. Serve them.
Read more SafeBankingAct: Explained at westtownbank.com.
About West Town Bank & Trust | West Town Bank & Trust, founded in 1922, offers financial solutions tailored to emerging and underserved industries. Its dedicated cannabis banking program provides cannabis companies and their ancillary partners with a complete suite of financial services products. This includes business check accounts, electronic payment options and more.
Compliance is an important foundation of our cannabis banking program. The in-house team is made up of fully certified cannabis bankers, many of whom are currently part of the Cannabis Financial Institutions Group of the National Cannabis Roundtable. West Town Bank & Trust’s cannabis banking program is currently accepting applications at www.westtownbank.com/cannabis-banking.