When Phil Smith and Jenny Roseman started their Freshly Baked cannabis delivery business, they struggled to raise enough money to start their business.
Since their business is unrecognized by the federal government, only a handful of banks would do business with them – a challenge any new cannabis business must overcome.
“We had to prime this thing. Jenny and I went from kitchen table to kitchen table to collect the money we made, ”Smith said. “It would have been nice to just go get a business loan like a normal business.”
The Secure and Fair Enforcement or SAFE Banking Act, which was passed by Congress in April 2021 and is awaiting a Senate vote, would address this specific issue.
As it stands, interstate banks – banks that operate nationwide – are prohibited from working with cannabis companies due to the fact that the drug is illegal at the federal level.
Banks that work with these stores can receive hefty fines and penalties, so many banks avoid making loans or managing the finances of these newly formed businesses.
“Sometimes I feel like I was working in the previous century,” said Nicole Campbell, owner of The Green Lady Dispensary located on Nantucket Island, where there are a very small number of banks in the first place.
Due to the limited number of banks these stores can fund with, the door is wide open for shady and predatory behavior – giving incoming store owners a backdoor solution to raising funds to start their business. New store owners will have a much easier time opening their stores compared to when current store owners started their businesses.
“It is very difficult for emerging companies to secure capital investments during the license application process in the absence of traditional lending structures,” said MassCann chairman Grant Smith, a long-time cannabis activist. date in Massachusetts. [That] opens the door to the predatory behavior of private vulture capitalists.
The SAFE Banking Act will remove these penalties, and federal banks, credit card companies, and other financial firms will be able to get involved in the cannabis industry, removing the power of financial predators who aim to take advantage of these struggling small businesses.
Campbell works with Bay Coast Bank for their The Green Lady Dispensary store. She and her husband funded their business entirely on their own, with no outside investors, and Campbell said she was happy to have found a bank on Nantucket Island that feels comfortable working with. them.
“It was really, really difficult,” she said.
As more banks start doing business in the industry, it will be easier for independent family businesses like Campbell to join the competition, resulting in lower prices, as well as a less payment process. complicated, according to experts.
National credit card companies like Visa and Mastercard are also penalized if customers use their services in a cannabis store. Therefore, dispensaries can only accept cash or debit payments. When customers make a purchase, they have to pay as if they were using an ATM.
Sometimes Campbell said they can’t even give change when people pay cash. When out-of-state tourists walk into the Campbell’s store, she has repeatedly stated that they are unaware of these rules and therefore cannot pay for their products.
The SAFE Banking Act will allow these large credit card companies to provide services to cannabis customers, making payment for cannabis purchases much more convenient. Customers could even pay through payment apps like Venmo and CashApp. Meanwhile, store owners won’t have to deal with so much money.
However, this bill offers only a small victory to current store owners in the Massachusetts cannabis industry. According to the chairman of the Cannabis Control Commission, Steve Hoffman, there are already several local banks that provide services to local cannabis stores, so there won’t be a drastic change here if the bill comes to fruition.
Additionally, Massachusetts and the Cannabis Control Commission place a strong emphasis on social equity and addressing racial inequalities within the local cannabis industry. Social equity programs were enshrined in cannabis legalization laws in 2016.
Many cannabis officials and activists criticize the SAFE Banking Act for failing to address these racial inequalities. Since social equity is the top priority within Massachusetts industry, the actual impacts of the bill do not match this vision.
“If you’re not intentional about fairness, it won’t happen,” said Smith of MassCann. “If the bill is implemented properly, especially with some sort of equity structure at the center of it, it will lead to more competition in the market, lower prices and it will lead to revitalization communities that have suffered for so long. “
Some local cannabis store owners, like Pure Oasis co-owner Kobie Evans, have said they are somewhat offset by the impacts of the bill.
While the bill will make operations more convenient for store owners, they would much prefer federal drug legalization, the promotion of social fairness and the reversal of the effects of the war on drugs. The bill doesn’t add much to that effort, so they’ll nod their heads and keep “fighting for the good fight,” as Evan said.
Evans also said he believed the SAFE Banking Act was aimed at the big, wealthy corporations in the industry rather than small, family-owned stores.
Those fighting for federal legalization have fewer resources than wealthy corporations pushing for the SAFE Banking Act, which is why this bill hits Congress ahead of a legalization bill, experts say.
“If you’re Bank of America, you have more money to pay a lobbyist,” Evans said.
Either way, there are some benefits to small stores if the bill passes, especially those trying to break into the industry.
“Just because the bill does not do everything we need to do does not mean that it should be opposed,” Hoffman said.
Stay up to date on all the latest news from Boston.com