Cannabis start-ups likely to face banking roadblocks

Financing a marijuana business

Financing a marijuana business

Any time a new industry is in its earliest stages of development, there are likely to be unforeseen obstacles. That’s certainly true of the fledgling recreational cannabis industry in Minnesota. However, among the biggest obstacles is one everyone is aware of but can’t do much about. Most federally-regulated banks are reluctant to work with cannabis businesses because marijuana is still considered illegal under federal law.

“The thing that needs to happen…is we need the federal government to change the rules around banking,” says Rep. Zach Stephenson, DFL-Coon Rapids.

Banks with federal charters generally stay clear of the cannabis industry because they fear violating federal anti-money laundering laws. There is a bill in Congress called the “SAFE Banking Act” aimed at allowing federally-regulated banks to take part in the cannabis industry in states where it’s been legalized. It passed the House in 2019 but hasn’t passed the Senate.

In the meantime, in many states, credit unions and state-chartered banks are filling the void.

“Now that we’re legal in 23 states I think some banks and some credit unions, particularly those that are state-chartered rather than federal-chartered have more comfort working with cannabis businesses,” Stephenson told 5 EYEWITNESS NEWS this week.

Businesses like, based in Bloomington, were able to find a state bank to work with in Minnesota to help them start a company making low-dose THC and CBD products last January. They had a tough time finding a lender even though they were planning to sell products that are not illegal under federal law. 

“We went through about 12 banks…and I don’t remember if it was the 12th or 13th before we finally found a bank willing to work with us,” says Gan Lester, one of the co-owners of

Her business partner, Sadrina Smith, says in addition to federal law, there’s also a stigma attached to the CBD and cannabis industry.

“I think it’s taking time all over the United States for banks to get on board with it,” Smith said.

Lester and Smith said they hope to expand into the recreational cannabis business over the next 18 months but are a bit wary of what the banking landscape will look like.  

“It would be great if there were more banks willing to say, ‘Hey, we want your business,'” Lester said.