Business vs. Public Health: Marijuana Merchants Have New Issues

OLYMPUS DIGITAL CAMERAWhile the Feds, the state government, and opposing citizens are big issues for marijuana merchants, the California Marijuana Legalization Legislation may have inadvertently delivered a new issue for merchants to deal with: the balance of business versus public health. Apparently their promotions are for new business measure, without any effort to educate the public about marijuana. While this is something that should be corrected, it could lead to even bigger issues when marijuana merchants look for business funding.

A researcher at the UCSF Center for Tobacco Control Research and Education concluded that “the Dept. of Consumer Affairs and dept. of Food and Agriculture showed more attention on collaborating with the marijuana industry and business development and paid less attention to the effects on public health or to controlling the growth of a large marijuana industry similar to the multinational tobacco industry”. Unlike other products, marijuana merchants are not experts on the substances that they are selling, and it is important that the state educate merchants and consumers. This issue could make it harder for local lenders who want to support marijuana businesses. Banks are usually the worst place to look for marijuana business funding, because banks are controlled by the Feds. The Feds consider marijuana in any amount to be illegal, even though twenty-two states have legalized it in some form. For many legal issues federal law trumps state and local law, so banks are hesitant to hand out loans.

Bank loans are always not the best idea for business funding because repayments are not merchant-friendly. With a bank loan, payments are due almost immediately, and even if your business fails, you must keep up payments, or risk forfeiting your collateral. This can quickly damage your business if you miss a payment, as well as your personal credit. Business funding is different. With business funding, the amount given is not a loan but rather an advance on your future sales. Payments are not taken in one large sum every month, but rather in a set percentage from your everyday sales. This helps you stay on top of your payments, and helps you avoid default on a hefty loan.

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Welcome to New York, Where Marijuana Merchants Are Left Without Business Funding

marijuana banksEven though New York has legalized medical marijuana sales and usage, merchants are still having issues finding a marijuana business funding source. While most of the major US banks are headquartered – or have offices – in NYC, they are turning down applications from these merchants, due to its stance in the Federal law. Banks are regulated by the Feds, and marijuana is still illegal in the Feds’ eyes, so it is only natural that the banks want to protect themselves. However, it is legal in NYC, and these merchants must have a way to process payments.

With the amount of controversy surrounding this issue, it would seem that NYC is snowed under with dispensaries. The fact is, there are only five. Yes, five legalized medical marijuana dispensaries. It seems as though five may not do much damage to a bank or processor, but you have to consider that the goods are not legal in the Feds eyes, and that one chargeback can send a company spinning. One of the licensees is the talks with a processing source, and another is positive that they will find a source. The ability to accept plastic card (i.e. debit and credit card) payments tremendously helps businesses, and medical marijuana businesses are not different. Besides the ease of payment acceptance, it is also safer. “Cash Only” businesses are targeted, and once they money is gone, it’s gone.

Medical marijuana merchants from the 30+ states in which it is legalized are also having issues finding a cooperative marijuana business funding source. From payment processing to business cash advances, it is tough finding anyone to deal with your business. Luckily, there are some available, such as MMA, who offer up service and expertise in the industry. Regardless of who you choose, you need to make sure that they are indeed experienced in the industry, because this industry is one of the fastest to change, due to ever-changing states laws. Dealing with the local government is tough enough, but many times these processors must deal with the Feds, as well. You need to make sure that your processor will not back down and dump your account when the government comes calling. This has happened, and it leaves the merchants, the patients, and the local economy is a mess.

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Marijuana Merchants, You Can Get Business Funding!

woman holding two paper bags with moneyLegalized marijuana sales are on the rise, and this is a great time to hop into the industry. While the sales are great, and the business earnings are great, it can be tough to break into the business. Even in areas where the legalization has been accepted, there are still issues with opening a legalized marijuana shop. While your local and state government is an obstacle, finding business funding is another elephant.

Marijuana business funding is a pain. It is tough to fund your own business, and it can be even tougher to find a bank or loan provider to provide you with a loan. A loan is a bad idea for any new or struggling business, but it is often the first place merchants go when they are in need of extra money. With a business loan, the payback process starts almost immediately, and the loan provider does not care if your business is succeeding. All they care about is getting their loan repaid, which will not happen if your business is still struggling. Because of this, many merchants are worse off than before they took out a loan.

To avoid this hassle, merchants should search for business funding. Business funding is different from a loan, because, well, it is not a loan. The application process is simple, as this is not a loan process. All you need to apply is a copy of your driver’s license, a copy of a voided check, a copy of your lease or landlord contract, and 3 months’ worth of business bank statements and plastic card processing statements. That is all that you need – and everything is more than likely in your office right now. Along with the seamless application process comes a quick acceptance, many times within 5-7 business days.

Most businesses need funding to get started, or to come out of a slump. Legalized marijuana businesses have the hardest time finding funding for the businesses, due to its “high risk” labeling in the banking and processing industry. Before applying or accepting any type of business funding, be sure to ask questions, and do not feel obligated to sign up for something that you feel is not right for you or your company.

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To Access Banking, Marijuana Merchants May Have to Build Community Relationships

STANLEY BROTHERS GROW FARMFor marijuana businesses that are looking for access to banking, the solution may be in building relationships with local banking institutions. Despite recent promises by the United States government not to interfere with the interactions between legal marijuana companies and banks, most financial institutions are still hesitant to work with them. This has made even the most successful marijuana merchants mostly cash enterprises. However, some marijuana merchants are gaining access to traditional merchant accounts through forging relationships throughout the community.

Cannabis companies like Mindful in Colorado, have acquired merchant accounts with banks by being active in the community. Mindful markets itself as a wellness centered business, and promotes the wellness benefits of Cannabis throughout the community. Mindful executives also familiarize themselves with zoning laws, and build relationships with local officials. A focus on the political aspects of the marijuana business is greasing the wheels for many marijuana businesses. Lobbying and educating legislators about the drug, is leading to proper and constructive regulation of marijuana is some parts of the U.S. This in turn lessens the threat posed by federal authorities on law-abiding cannabis operations.

This interaction with legislators may have worked. Last year, the U.S. Justice and Treasury departments issued guidance on how banks could legally interact with marijuana merchants, however some banks still feel like they have too much liability if things go wrong.

Banks aren’t the only ones who are nervous about doing business with marijuana merchants. Major credit-card companies are refusing to deal with them until more universal regulations are in place, and the threat of federal prosecution no longer looms over the industry.

As a result, many businesses keep large sums of cash on their premises, making them and their customers targets for robbery. Adding to the burden is the fact that businesses are penalized for paying taxes in cash, which cannabis companies must do.

Some marijuana merchants are turning to venture capitalists for funding, while others are masking their merchant accounts as health care companies in order to gain access to payment processing. MMA provides competent and comprehensive marijuana payment processing for entrepreneurs trying to increase the profits of their business. Contact us today to see how MMA account managers can give you access to the payment options you and your customers deserve.


Will Increase in Competition Crash the Cannabis Industry in Colorado?

800x600-e922-odkazujeme01aRecent changes to Colorado’s recreational marijuana market has created a boom in the industry, but has left some afraid of over-saturation. Last October, the state ended its vertical integration rule and opened the market up to new entrants. Although the move has spawned a plethora of new businesses, it has also started conversations of impending price collapse and a fear that merchants will turn to the black market to reap lost profits.

Many growers believe the influx of new entrants will lead to a price collapse in the coming months as stand-alone growers increase competition and flood the wholesale market. On January 1, 2014, only medical marijuana facilities were granted Colorado permits, but last summer the state opened up the application process to businesses who were previously ineligible. This ended a crucial requirement that recreational shops grow at least 70% of the marijuana they sell.

Since the change, the number of recreational licenses in Colorado has jumped by 35% (870 licensed businesses). With this much added competition, fears of price declines may be well founded. According to Cannabase, an online marketplace that pairs growers with retailers, the price of recreational marijuana plummeted $600 per pound between September and December of 2014, while supply jumped at the same time. Cannabase CEO, Jennifer Beck, adds that the margins are now being squeezed in the state which could lead to a price crash.

Michael Elliot, the executive director of the Marijuana Industry Group, is concerned that the price drop could lead to desperate cultivators to turning to the black market to get better prices. If this happens, it would be a violation of one of the core eight principles defined by the Department of Justice. This would jeopardize the issuing of new licenses throughout the state.

Still, increased competition is good news for some in the industry. Businesses that deal in edibles now have more to choose from as more and more types of cannabis flood the market.

Despite the success of the cannabis businesses in Colorado, many merchants still find it difficult to secure competent recreational or medical marijuana payment processing from traditional payment processors. Luckily, there are some experienced online payment processors that specialize in fast and comprehensive marijuana payment processing.

Learn more about expanding your customer’s payment options with credit and debit cards by contacting us today!