Banking and financing can be a tough row to hoe for marijuana growers. Though weed has been legalized by state law in some form in all but 10 states, cannabis remains illegal in the eyes of the federal government. Because of marijuana’s odd legal status, many banking services are unavailable to cannabis businesses. The federal government regulates credit cards, bank loans and financing. Most federally insured banks won’t serve the cannabis industry for fear of federal prosecution.
Adina Birnbaum is the owner and CEO of Providence-based Talaria LLC, the only woman-owned cannabis grower in Rhode Island. Birnbaum once owned a chain of three weed dispensaries in Pennsylvania with her husband, Val Gorski, and a business partner.
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PBN: How does your banking experience in Rhode Island compare with your experiences in other states?
BIRNBAUM: It’s a breeze. The credit unions here are extremely cannabis friendly, but there’s a $200 monthly service charge they levy because they need to do the extra work to prove we’re not laundering money. It was more complicated in Pennsylvania and much more expensive because we were handling a lot of cash. Our bank there, one of the very few that handled our industry, charged us $1,200 a month – plus a percentage of the cash – because they were sending out their own armored truck to pick the money up and count it.
PBN: The Secure and Fair Enforcement Banking Act was reintroduced recently in both chambers of Congress. If it’s ever adopted, how would it impact marijuana businesses?
BIRNBAUM: My banking fees would go way down! The SAFE [Banking] Act would allow the dispensaries – that is, the compassion centers – to accept credit cards and we’d be allowed to apply for bank loans. When we do get loans, it has to be through private equity. Those rates are always higher than financing through a bank. Sometimes the rates can be triple prime.
PBN: What other financial hurdles have legal cannabis businesses faced?
BIRNBAUM: Because of the way things are regulated, I couldn’t get any COVID money for Talaria, even though we were very impacted by the pandemic. And all the small-business loan programs needed for expansion are out of reach.
PBN: In the early days of legal sales, we used to hear of retailers handling huge garbage bags filled with cash. Is that still the case?
BIRNBAUM: Since I’m on the growing side, I don’t have to handle any cash. And we don’t take cash from the dispensaries. The only green we touch is the plant. Many of the retail stores have what they call cashless ATMs. The idea is a customer can use a debit card. If they want to buy $47 in cannabis products, they take $50 out of the cashless ATM. That gets credited to the cannabis retailer, which in turn gives them back $3 in change. It’s a bit of a workaround, and it’s often shut down from time to time.
PBN: If the federal government doesn’t recognize cannabis as being legal, do you still have to pay taxes? If so, how does that work?
BIRNBAUM: We sure do. No one escapes taxes! But we pay a much, much greater percent than any other business sector. That’s because of a 1981 court case where a cocaine trafficker got popped for tax evasion. He had tried to write off his cars, boats, you-name-it as a business expense.
Congress passed legislation called 280E that said if you’re involved in drug trafficking, you could only deduct the cost of goods sold. For the dispensary compassion centers, it’s very onerous because they can’t deduct rent, utilities and employee salaries. For a cultivator, it’s inconvenient but not as bad because we can write those off. We still can’t deduct legal or accounting fees. If the federal government legalizes cannabis, 280E will go away.
Contact PBN staff writer Sam Wood at Wood@PBN.com.
