A new law might make it easier to get a Marijuana Business loan
Missouri Governor Mike Parson recently signed a new law that will make it easier for some banks to grant loans to marijuana businesses.
The new law will also require those businesses to submit fingerprints for all marijuana company employees to the state highway patrol for background checks.
Leaders in both the banking and marijuana industry are in favor of the changes. The Missouri Banking Association and the Missouri Cannabis Trade Association told The Star that the new law will make it easier for banks to meet the federal requirements needed to work with weed businesses.
“This is a big win for both the cannabis industry and the banking industry here in Missouri,” Jack Cardetti with the Missouri Cannabis Trade Association said. “I truly believe that this continues to normalize the cannabis industry in a positive way.”
Changes to banking for Marijuana Business
Missouri Banking Association President Jackson Hataway and Cardetti said they both hope the law encourages more state-chartered financial institutions to serve marijuana businesses because it will make it easier to meet the federal requirements to do so.
“What you have is a state solution that allows information sharing but very few banks are willing to take the risk of banking those businesses,” Hataway said.
Since the federal government still regulates marijuana and classifies it as a high-risk controlled substance, state-sanctioned businesses are still considered illicit under federal law. This makes it harder for banks to offer services because they need to maintain strict federal standards.
“Very few banks are willing to take the risk of banking those businesses because you have to at least assume some level of federal oversight in your banking practices. That means the federal government can come along and say, ‘You know what, this is an illegal business. The funds are illegal, and therefore everything connected to those illegal funds is frozen,’” Hataway said.
Banks that do choose to serve marijuana businesses can offer bank accounts, deposit services and loans. Hataway said these services are especially important for marijuana businesses as they are at a higher risk of being robbed when operating as cash businesses with no secure place to deposit their money.
Before banks can step in though, they must meet a series of requirements including passing federal inspections by the U.S. Financial Crimes Enforcement Network and the Bank Secrecy Act, Cardetti said.
Banks are also required to absorb the costs of performing those inspections, and those costs are typically passed on to the marijuana businesses seeking banking services, Cardetti said.
To help banks meet federal guidelines, the Missouri Cannabis Trade Association worked with state officials to streamline documentation process for state banks.
Now with the new law in place, banks will be able to request the data they need to provide to the federal government from state agencies like DHSS or the Department of Revenue.
The new law will essentially ensure that banks can “dot every I and cross every T,” Hataway said, without spending as much time or money to do so.
“This will actually clear the path for more banks in Missouri to potentially participate, show interest in and provide normalized banking services to cannabis businesses,” Cardetti said.
Which banks in Missouri offer baking services to cannabis businesses?
There are more than 200 state-chartered banks in Missouri, and it’s estimated that around 10 of those banks serve marijuana businesses, Hataway said.
Hataway said that many banks don’t advertise that they serve marijuana businesses, but there are a few who are open about the services they offer. Banks like Triad Bank, located outside of St. Louis in Frontenac and Focus Bank, which serves communities in Southeast Missouri, promote their services to marijuana businesses.
Why banking is hard for weed businesses
Congress has tried to pass multiple iterations of a SAFE Banking Act that would prohibit federal regulators from penalizing banks for offering banking services to marijuana-related businesses.
Each time the bill dies before it becomes law. This spring lawmakers in both the federal House and Senate introduced the latest SAFE Banking Act in hopes of scoring more protections for banks looking to serve state-sanctioned marijuana businesses.
“ If [we say], ‘Hey, marijuana for medicinal purposes and recreational purposes is legal [in our state]’ then those businesses are legal, therefore the funds flowing through them shouldn’t be treated as illegal business funds,” Hataway said.
The passage of a federal SAFE Banking Act would also allow federal institutions to consider offering banking services to marijuana businesses. In turn, marijuana businesses could also offer customers more electronic payment options.
“We’ve been fortunate in Missouri to have several local banks willing to work with cannabis companies, but from a federal level, US Bank, Bank of America, PNC, Chase, none of them will touch cannabis businesses,” Clovr CEO Josh Mitchem told The Star in February. “Credit card processors won’t touch cannabis businesses because of the federal classification of it.”
Marijuana employees will have to submit fingerprints
Currently, only marijuana business licensees have to submit fingerprints to determine whether they have a disqualifying felony offense, but fingerprints are not required for employees. Once the law goes into effect on Aug. 28, all employees, contractors, owners and volunteers at a marijuana cannabis facility for more than 14 days will need to submit their fingerprints.
Cardetti said the Missouri Cannabis Trade Association worked closely with state lawmakers to make sure that the background check measure in the new law would not lead to overregulation of the industry.
“As a result, in the newly passed legislation, only contractors that are performing work at a marijuana facility for more than 14 days a year are subject to criminal background checks,” he said.
