Owning a dispensary can be very profitable, but it can also be a legal nightmare. Even if the cannabis laws in your state allow people to buy cannabis legally for recreational and medical purposes, it is still illegal federally, which can create problems when dealing with the money you are generating from your business. Since most people pay for everything with credit cards, you might be shocked to find that cannabis credit card processing is difficult to find. Read on to learn about your customers’ payment options so you can find the right solutions for your dispensary.
Cash Is King
Cash is the most accepted form of payment when your customers are buying your cannabis. Most dispensaries are cash-only businesses. The downside of only accepting cash is that it is dangerous to have all that cash around your business. Theft is a real threat, and you are in danger of getting robbed when you only can accept cash.
You need to make sure you have ample storage for all of the cash, and you also have to make sure that the cash will be in a safe space, so you don’t have to worry about it getting stolen. You might have to spend more money on hiring guards or even trucks to transport your cash. You even have to pay your taxes in cash, and you won’t be able to make the normal deductions that most conventional businesses can make.
Federal Laws On Cannabis
Your dispensary might be legal in your state, but it is still illegal on a federal level, which puts your business in a bad situation. Banks are not allowed to process dispensary money, and they cannot profit from marijuana in any way. Manufacturing, distributing, selling, and possessing cannabis are all illegal on a federal level, which can make things very difficult for your business. Legally, you could be prosecuted along with everyone who is involved in your dispensary.
Federal laws make everything very complicated from a financial standpoint. Banks are not supposed to take cash from dispensaries, and it is considered money laundering if they do, which is a grave crime. There are loopholes in place which allow banks to work with dispensaries if they follow certain anti-laundering laws. Unfortunately, these laws are so complicated and time-consuming that most banks don’t want to take on these laws’ hassle.
Alternative To Cash
Some dispensaries try to form shell companies that will allow them to use credit cards and other payment forms. Unfortunately, this is considered money laundering by the government, and you could get into big trouble if you ever get caught. Other businesses borrow merchant accounts to accept credit card payments, but this is also illegal as it is considered factoring, and factoring is illegal. To make things even more complicated, if you don’t have bank access, you cannot access credit card payments since the major credit cards do not allow people to buy cannabis with their cards.
What Is Credit Card Factoring?
Credit card factoring is common, but it is illegal, and you are taking a risk if you do it. With credit card factoring, the dispensary uses a merchant account that has been set up for a different processor. When you sign a merchant agreement, you are only supposed to accept cards for the business you signed up for. It is illegal to use your account for a different business. You might open a merchant account to sell clothing yet use it to accept dispensary payments. This is something that you can’t do.
If you are determined to use credit cards for your dispensary, you might want to look into some startup companies coming up with solutions to this issue. Some mobile payment options allow customers to link their credit cards to pay for their cannabis at the dispensary.
These apps require that buyers provide proof of their age and that they are allowed to purchase cannabis. When they are verified, they get to upload their banking information. These types of mobile payment systems go around the bank to allow payments. They can be a little complicated to use, and many people don’t want to bother with them, so they are not as popular.
Watch Out For False Promises
Unfortunately, there are plenty of services that promise to open credit card accounts for dispensaries. Many of these services are a scam. They might give your business the wrong classification and call you a novelty shop or tobacco store. These services skirt the laws, and this can lead to trouble down the line. While you might not get caught, the chances are that something will happen, which can cost you a lot of money and even result in your dispensary getting shut down.
You might also getfrom non-FDIC-insured banks. These banks are often located in foreign countries, and your money is not going to be protected. If it gets stolen or something goes wrong with your deposits, you could end up losing money. This type of processing service is hazardous, and the service itself could steal your money, and you will never be able to trace your money or get your money back.
It is important to avoid scams as much as possible, and you want to make sure that any service you deal with is legitimate. Since the marijuana industry commands huge profits, many criminals want to get a piece of your profits. It would be best if you were very careful about any financial institution you work with.
Running a dispensary can be very lucrative, but you have to be very careful about who you work with. Working with a scam artist or doing something illegal can land you in hot water and ensure that you end up losing money or even winding up in jail.