Why Are Marijuana Merchant Accounts High Risk? How to Get One for Your Business.
The marijuana industry is flying high. More and more states are legalizing cannabis growing and various supply chain enterprises. These range from raw weed and hemp to medicinal uses like cannabidiol (CBD). CBD Oil merchant payments and Medical Marijuana Merchant Accounts are in High need to capitalize on this growing opportunity for Entrepreneurs and Investors alike.
Medical marijuana is legal in over 30 states and about a dozen states permit its recreational use as well.
The biggest challenge for expanding your business tends to be, not being able to take card payments. Simply put, you can be declined by banks and processors because marijuana merchant accounts are considered High Risk.
Up till now, this has always been a cash industry. However, a truly legitimate business operation needs to attract in-store and online sales as well. Taking card payments is a vital “must-have”, especially for the MMJ Industry. For this, you need to apply to a Payment Processor that understands this Business Type and specializes in High-Risk Marijuana Merchant Accounts.
Why your bank will not grant you a marijuana high-risk merchant account
The sector has a murky past because of various drug laws and illegal usage. That picture is changing quickly but regulation is slow to catch up.
It’s still a grey area, even at the state level. This means nobody is totally sure of where they stand legally in all aspects of commercial transactions.
More importantly, marijuana is still illegal under federal law even if individual states still permit it. Doctors may not prescribe it. That alone is enough for banks to adopt a hands-off approach.
Even though the DEA is dealing with bigger problems like opioids, fentanyl, heroin, cocaine etc, marijuana based sales are still taboo when it comes to merchant processing. If you are a bank, it ultimately adds up to risk. We know that banks are very averse to any form of risk because that means a threat to profits. And that’s what it boils down to.
Banks are still worried about the legal dangers if they dabble in any aspect of cannabis. They avoid the possibility of litigation like the plague. That means that marijuana merchant accounts are considered High Risk.
The Cannabis supply chain and a wealth of merchant opportunities
Cannabis is now a serious business. The days of the hippie and pop culture are ancient history. Science is proving its medicinal benefits and big pharma is looking closely at its profit potential.
Like any other major product, cannabis is developing a supply chain that spans many activities between grower and consumer or seed to sale. Any company that touches it may require a high risk marijuana merchant accounts approval. That decision to approve or deny will eventually be made by card processing acquiring banks on a case by case basis.
The product range is not limited to just the drug itself. Ancillary industries are springing up as well.
- Farming – the “green rush”. Growing marijuana requires a license. The application process varies in each state.
- Cannabis processing – Drying, preserving and packaging it for a range of uses is also a licensed activity.
- Licensed supply & distribution businesses – Some states require retailers and other operators to deal only with distributors.
- Retail business – Ideal as an add-on to an existing store or as a brand new storefront. Consumers must purchase cannabis from legally licensed retailers, known as dispensaries. Here you will definitely require a marihuana specific merchant account.
- Marijuana-infused body products – Just like Whoopi Goldberg, for example, who has developed a line of medical marijuana-based tinctures, balms and bath soak.
- Packaging – Every product needs slick and attractive packaging that appeals to buyers.
- Education and training in cannabis matters – as a new industry, demand is strong for expertise and consultancy in every aspect.
Can I use my existing merchant account for marijuana transactions?
You may get away with it for a little while. Until your merchant account processing company or acquiring bank realizes what you are doing. Then you will find your card payments service terminated. That’s a major risk for cash flow and will damage your business.
All merchant accounts provided by acquiring banks come with strict Terms & Conditions. That’s because banks apply individual rules to different industries based on the risk they present.
For example, say your merchant account was opened for the stated purpose of selling clothing. That’s a low-risk enterprise with small ticket items. If you then sell large ticket items, such as furniture, you have changed the risk profile of your account. You are in breach of contract.
How do I get a marijuana high-risk merchant account?
The first step is to engage with cannabis payment processor specialists who have expert knowledge about the market for card processing services. Remember that there is a merchant account solution for every legal business, including marijuana.
We at SecureGlobalPay specialize in matching businesses with acquiring banks that accept applications from their specific industries. We have spent many years building up a vast network and have acquired long-term working relationships with banks and acquirers. That means we know which ones to put you in touch with.
The acceptance process works in a similar way to applying for a loan. The acquiring bank’s underwriter will request details of your business.
These include things such as financial statements, including profit & loss and cash flow projections. Underwriters want to see evidence that your bank account is funded and any existing merchant accounts have been run responsibly.
Your first step to getting a merchant account for your marijuana business
We will advise you on which details the underwriter will request after we have matched you with an acquiring bank. Click here to start the application process.
We guide you every step of the way. Usually it takes between 5 days and two weeks for us to get back to you with a status update.
If you prefer, call us first on +1-800-419-1772 and speak with one of our payment processing experts. They will explain all you need to know about getting a high risk marijuana merchant account.
