As a recently federally legalized crop, hemp has been given a luxury it hasn’t had in more than 80 years: the green light for production. But legalization did not erase the stigma surrounding cannabis, nor did it provide widespread education or all necessary clarifications on federal regulations. Those hindrances combined have made financing hemp businesses a nightmare for some. From simple actions, like opening a bank account, to more specialized services, like credit card processing, financial problems have plagued hemp businesses all along the supply chain.
As a result, many have had to implement piecemeal services from a variety of sources. Our cover story subject, Luis Vega, for example, cashed out his 401(k) fund to launch his farm-to-store business, ¡WEPA! Farms. As a minority farmer, Vega also eventually received a $150,000 investment from the i2 Accelerator Program, which is a partnership between the Minority Cannabis Business Association and Merida Capital Partners. (Read the cover story here.)
The problem lies, in part, with the lack of banks willing to service the hemp industry. According to Fincann, which connects cannabis businesses with banks and other financial services, fewer than 200 of the country’s more than 5,000 federally insured banks are open to servicing cannabis businesses across all sectors.
Fortunately, there are solutions. In “Banking Burdens,” Hemp Grower dug into why larger national banks are hesitant to work with hemp businesses, as well as where these hemp businesses have found financial services. Those business owners also offered their advice on how fellow farmers and entrepreneurs can form productive banking relationships.
And, other solutions, at least for some, are already in progress. For example, despite being one of the final states to legalize hemp production, South Dakota’s legislature is currently considering H.B. 1203, which would clarify that a bank may work with “any person licensed in this state to engage in the business of industrial hemp or marijuana.”
Also, while U.S. Rep. Ed Perlmutter has introduced The SAFE Banking Act to Congress every year since 2013, he recently told The Denver Post he’s “pretty confident” it will finally pass this year. The bill would lift restrictions on banking not just hemp, but all types of cannabis.
Broader banking solutions are on the way. Until then, Hemp Grower will help you roll up your sleeves and get creative.