3 Tips for Hemp and CBD Businesses Orphaned by Big Banks

Find the right bank to partner with using these strategies.

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May 12, 2021

Editor's Note: FLCBank only services businesses in Florida at this time.

Despite hemp’s legalized status, the industry still faces a crop of problems when trying to find banks willing to offer account services and loans.

Across the U.S., hemp and CBD companies are flourishing as demand for the plant, which can be used in clothes, food and even construction materials, continues to rise.

Here in Florida, where Florida Capital Bank (FLCBank) is based, more than 23,000 acres were approved for hemp cultivation in 2020, according to the state’s agriculture commissioner. This growing sector will continue to play a prominent role in the state’s agricultural industry.

However, nearly 50% of new hemp customers reaching out to my team at FLCBank say they’ve recently been dropped from their bank – often with very little notice and even less assistance in finding alternative options. We know from our conversations with peers across the industry that this troubling trend is a national issue.

But it shouldn't be that way.

Our team at FLCBank has extensive experience working with entrepreneurs who are ready to put down financial roots for their hemp or CBD business. Establishing and managing banking accounts is essential for any business to scale for growth.

If you’re in the hemp or CBD business, how can you ensure you’re finding the right bank now to avoid these pitfalls?

Tips for Success

Hemp and CBD regulations are constantly evolving. At this time, the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) do not plan to issue specific guidance on hemp; instead, they are depending on each institution to provide financial services in a safe, sound manner.

A lot of financial institutions consider the hemp business to be risky. When the Agriculture Improvement Act of 2018 (the 2018 Farm Bill) legalized the crop, it required hemp meet a low-THC standard to be labeled an agricultural commodity instead of a controlled substance.

Banks don’t always have the resources to ensure hemp and CBD businesses are complying with those regulations, leading to dropped accounts and frustrated customers.

That’s why it’s so important to weed out the troublesome banks upfront to save yourself time and money. We offer these tips for success:

  • Look for a bank with a dedicated hemp team. You may get different answers from different people every time you step into a regular bank. But when there’s a team dedicated to you and your business, you’ll get the correct information without the run-around. In addition, with a hemp team, you know the bank is committed to serving your industry and has done the necessary training and research to meet your needs.
  • Ask questions of your bank and of the hemp community. The hemp/CBD community is a fairly close-knit group. Seek out your fellow farmers and small businesses, find where they bank and ask how they like it. When speaking with bank representatives, it’s important to ask the following questions: Do you have account officers who are knowledgeable about hemp and its rules/regulations? Is it part of your long-term strategy to be in this business? Are you committed to the additional paperwork and monitoring to ensure a successful working relationship?
    If you’re not satisfied with your bank’s answers to these questions, consider uprooting your business and moving your accounts to one where your industry is a priority. Otherwise, you risk banks dropping your account down the road.
  • Understand (and anticipate) that your bank may have additional documentation requirements. Banks that have committed to serving hemp and CBD businesses often require additional layers of documentation as part of their application process. These documents could include state permits, an employer identification number (EIN) or Internal Revenue Service (IRS) number, business registrations, tax certificates and local business permits. Be organized, be patient, and be prepared.

The hemp and CBD industry is evolving, and banks must evolve with it. Finding the right financial partner can help unlock new growth opportunities.  

Lee Wedekind is the director of hemp banking at FLCBank.