For years, cannabis companies running legal operations have been forced to bank like thieves.
“We’re talking huge rooms full of cash. Like Scarface,” says Nick DiFrancesco, executive vice president of sales and marketing at PurWell, a Delray Beach-based CBD company. “I know it sounds crazy, but it really is that way in places like California.”
Soon, that could change. A banking bill that would drastically affect the way Florida cannabis and hemp-oil companies do business is one step closer to enactment following a Wednesday vote in the U.S. House of Representatives.
The SAFE (Secure and Fair Enforcement) Banking Act was introduced by Colorado Democratic Sen. Ed Perlmutter in March. It received bipartisan support during this week’s House vote, passing 321 to 103.
The bill’s approval is considered significant because it allows for banking related to a drug still considered illegal under federal law. The next step is to pass it through the Republican-controlled Senate.
In the meantime, cannabis companies forced to operate as cash-only businesses have become prime theft targets, DiFrancesco says, and many have been tempted by money laundering and tax evasion.
The new law could have major impacts on hemp-oil companies such as PurWell. These companies have been viewed as high risk, and they face higher loan rates and stricter lending practices. Most are prohibited from banking with FDIC-insured institutions.
“We can’t go to Bank of America and use that bank,” DiFrancesco says. “[There are] very, very select few banks in the whole country that we can use. With marijuana, there’s no banking at all.”
DiFrancesco says the change will not only lend legitimacy to the burgeoning industry but also enhance oversight and regulation. He welcomes that, saying it will force less legitimate brands to comply.
For consumers, the bill could lead to more innovation from companies currently unable to borrow for large capital projects. And it could bring about safer transaction practices online and in brick-and-mortar shops, according to Derek Thomas, vice president of business development at Fort Lauderdale’s Veritas Farms.
The company boasts a farm-to-table approach with its hemp products, which are available in about 5,000 stores, including major chains such as Bed Bath & Beyond and Kroger. But Veritas still faces higher interest rates on business loans and is prohibited from banking with an insured entity.
Thomas says that while the SAFE Banking Act will have greater impacts on the cannabis industry, his company will also see some benefits. (Veritas Farms is part of the U.S. Hemp Roundtable, which pushed for passage of the SAFE Banking legislation.) Namely, he believes hemp and CBD-based businesses will be taken more seriously by financial institutions.
“We’ve heard of people having to pay 12 percent transaction fees [on each sale] and then having a 90-day reserve holding period on the cash,” he says. “It’s really challenging to operate a business that way. So we’re very hopeful this SAFE Banking Act will alleviate some of the constraints.”