Expanding banking opportunities come at a crucial time for Missouri marijuana businesses
Recently signed legislation will bring banks and cannabis operators in Missouri closer than ever before.
Signed on July 6, the changes to current marijuana regulations will make it easier for cannabis businesses to access the same benefits that others have always had. State-chartered banks now have expanded service abilities, and will be allowed to receive information directly from the Department of Health and Senior Services regarding inspections and other information form marijuana businesses that banks require to service cannabis businesses.
“Any entity that operates as a facility licensed or certified under Article XIV of the Constitution of Missouri may request in writing that a state or local licensing authority or agency, including, but not limited to, the Department of Health and Senior Services or Department of Revenue, share the entity’s application, license, or other regulatory and financial information with a banking institution. A state or local licensing authority or agency may also share such information with the banking institution’s state and federal supervisory agencies.”
This change and the protections offered to banks under the new legislation enables cannabis businesses to take out small business loans, something not previously allowed by many banks in Missouri. Cannabis is still federally illegal and most banks are chartered by the state or federal government leaving them in an uncomfortable situation.
According to the Missouri Division of Finance, the state ranks fourth in the country for the number of state-chartered banks, and those banks have the ability to expand their business.
Other states with legal marijuana programs have already passed variations of the new law. Operational Security Solutions (OSS) CEO Scott Solomon runs a business that specializes in secure cash management and logistics. One of the main sectors OSS services is the cannabis industry. OSS started in California and has since expanded to Philadelphia and Pennsylvania. When similar banking legislation passed, it helped cannabis businesses in a positive way.
“When we originally started engaging the industry, we directly engaged the local businesses. So these cannabis-related businesses or marijuana-related businesses, but it didn’t take too long to listen to them and ask them, what are your pain points? Where do you have difficulties in thriving as a highly regulated business? And almost unanimously, our clients were saying, banking,” Solomon said.
That is where OSS comes in to help them establish relationships with financial institutions. They help businesses stay within the needed regulations to keep their banking relationships.
“The difference with the cannabis industry is that they have to go through an onboarding process that is very laborious so they have to submit financial records as far back as they can reasonably access. They have to provide information on the entire ownership group. And so they have to have a business plan, they have to have a security plan. And it’s robust… If they start skipping a few of the rules and regulations, it’s only a matter of time before that account gets shut down and possibly the business gets shut down. So we try to work with both entities to foster a compliant environment,” Solomon said.
“However, what we’ve seen is that as states continue to pass legislation, as the industry grows, as banking services become more available, it’s a better thing for the entire industry,” Solomon said.
CEO of Hippos Cannabis Nicholas Rinella has been one of the leaders in the cannabis industry in Missouri since the legalization of medical marijuana in 2018. He had previously done business in other states and talked about how things have changed over the years.
“I think it’s nearly been ten years since I first got in the cannabis industry, to begin with,” Rinella said. “Things weren’t quite as easy as they’ve been in Missouri. So there was a lot of cash, and nearly everybody just was buying and selling cannabis via cash. That just doesn’t happen anymore. So when we’re delivering product, we aren’t picking up cash. There are wire transfers back and forth… There’s not a whole lot of cash at dispensaries anymore. Most of that money is being handled and transferred just like any other business.”
Banks were also having to spend extra time and money to service cannabis businesses, a cost that was often passed on to marijuana-related businesses at an exorbitant rate, something that should improve with the bill. With the success of adult use sales bringing 400% more money into legal marijuana businesses through retail, and the pending launch of the new microbusiness category, the change comes at a pivotal time for Missouri’s cannabis industry.
“Your everyday banker is not worried about cannabis regulations day in and day out. Well, the state compliance officers, that’s what they do every single day. They make sure that the licensees are in compliance. And so there was a logical understanding that if the state says that you’re in compliance, you’re in compliance. And so that’s really what this bill does is it stops. Basically, the state is signing off on what the banks were having to do already,” Rinella said.
The main thing any person working in the cannabis industry wants is to be taken seriously, and that starts with fair business options.
“The nice thing is it’s just another step that normalizes, and we just want to be treated like every other legal business. This bill doesn’t do it. If you looked at it from any other industry, they’d be like, wow, you just get to do things that everybody else does. And that’s all in the cannabis industry we’d like to do. It’s a legal business. We just want to be treated like every other legal business, and this is one more step into us doing so,” Rinella explained.