More banking options for cannabis businesses; similar complaints

The Brattleboro Savings & Loan is headquartered on Main Street in its town. Photo by Kevin O’Connor/VTDigger

This summer, Brattleboro Savings & Loan and the Vermont Federal Credit Union entered Vermont’s booming recreational cannabis banking sector, bringing to four the total number of financial institutions willing to leapfrog regulatory hurdles to serve new businesses across the country. Vermont.

As the first retail stores plan to open Oct. 1, some cannabis business owners — especially small growers — say that despite the growing number of options, they’re still looking out-of-state for services that meet their needs. Others say they will only work in cash for now.

Dan Yates, president and CEO of Brattleboro Savings & Loan, said the bank began opening cannabis business accounts in June. Today, the bank serves five businesses and producers, as well as a retailer, while another nine or 10 businesses are awaiting licenses from the Cannabis Control Board before their accounts can become active.

The Vermont Federal Credit Union has been accepting cannabis business accounts since July, said Doug Fisher, the bank’s chief administrative officer. As of this week, the credit union had opened accounts for 53 recreational cannabis businesses, he said.

“We are excited about the opportunities this can provide,” Fisher said.

Vermont State Employees Credit Union has the longest track record serving cannabis businesses, having all five existing medical dispensaries as customers, said Greg Huysman, director of business loans. This year, the credit union opened 80 new accounts for recreational cannabis businesses, he said, most of them growers.

VSECU members are currently voting on a proposed merger with the New England Federal Credit Union, the fourth financial institution on the list.

Yates said if all goes well, Brattleboro Savings & Loan would like to be the go-to banking institution for cannabis businesses south of Highway 4. But for now, the bank is limiting cannabis customers to those located in Windham County and eastern Bennington County. , where it has a branch in Winhall.

“If it’s too far out of that market area, right now we won’t bank it, but we’ll see,” Yates said. “It’s dipping your toe in the water before jumping completely into the water.”

More than one bank can handle

Cannabis continues to be illegal under federal law and Vermont’s regulatory environment is new. As a result, Brattleboro S&L estimates it needs a full-time employee specializing in federal compliance for 15 accounts, according to Yates. Currently, Brattleboro S&L has one employee familiar with related federal laws, with a full-time assistant who will also monitor cannabis accounts.

For VSECU, staffing all new accounts was also a challenge. The credit union has put a pause on opening new cannabis accounts.

“It was hard to predict what market share we would get initially,” Huysman said. “Our success has been beyond what we can handle at this time, so we just need to line up more resources and then the intention is to reopen our cannabis membership openings.”

The impact of this decision was felt by growers and retailers across the state.

While Ana and Josh MacDuff, owners of Mountain Girl Cannabis, a retail store in Rutland that received the state’s first license for a retail recreational cannabis store, were able to secure an account with VSECU, the grower and retailer Scott Sparks was not.

Sparks had banked with VSECU for two of his other businesses, but he said when he applied for an account for his cannabis growing business, he was turned down. So he went to Brattleboro Savings & Loan, and that’s where he will also do some banking for his cannabis retail business.

The impacts of the merger debated

Merger critic and former VSECU board member Jerry Diamond believes the decision to halt the taking of new recreational cannabis accounts was born out of concern that federal regulators would halt the proposed merger.

“To say that they were suspending taking on new accounts and the reason was that they didn’t have enough staff literally cannot be true,” Diamond said, pointing to the two years that banks and cooperatives in credit have had to prepare since the legislature legalized recreational cannabis sales.

Huysman disputes this vehemently. That concern was not a factor, he said, pointing out that the New England Federal Credit Union already had cannabis businesses among its clients. “And they plan to continue that business and this merger won’t change that,” Huysman said. “This will provide us with more resources to take care of more cannabis businesses.”

Andrew Subin, a Burlington attorney who represents cannabis companies, now refers clients to the Vermont Federal Credit Union as well as Brattleboro Savings & Loan. He said he was steering his clients away from the remaining option, New England Federal Credit Union, because of the impending merger.

John Dwyer, president and CEO of the New England Federal Credit Union, dismissed that concern. He said federal regulators have already approved the merger and the credit union has concluded that it can continue to offer cannabis-related banking services if the merger goes through, he said.

More banks, still high fees

Subin also said he refers clients elsewhere because “New England Federal Credit Union fees are pretty exorbitant.”

“We don’t believe our fees are high,” Dwyer replied. “These accounts are most often the type of account that requires regular reporting that we need to report on and we have set the pricing to recognize the costs associated with this support.” He declined to reveal any specific charges.

Brattleboro Savings & Loan charges different monthly fees for growers, manufacturers, retailers, wholesalers, test facilities, and businesses with built-in licenses. The amount charged also depends on the size of the business, Yates said.

So far, the southern Vermont newcomer appears to be offering the most competitive rates, Subin said.

But the biggest determinant of cost is the size and complexity of the business structure.

Karen Devereux, a Barton producer, said she and her husband opened an account with the Vermont Federal Credit Union after VSECU turned them down. Devereux and her husband grow 125 outdoor plants and 1,000 square feet of indoor plants, which puts them in the smallest category of growers.

For producers of this size, the credit union charges $100 a month to have an account, Fisher said. But customers with more than one license type are charged multiple times that amount.

Devereux and her husband are also pursuing a manufacturing license and a retail license.

“It’s very expensive,” she says. “It’s going to cost us $2,000 a month to get a bank account.”

Huysman said VSECU charges a variable rate based on the size of a customer’s deposit. For small customers, it’s 1.5% of deposits, he said.

Dave Silberman, a Middlebury attorney who represents cannabis companies, said he’s been driving clients away from VSECU in recent months because he feels its fee structure is too high.

But for Wyeth Shamp, a small town Georgia cannabis grower who does banking there, that’s less than the flat fees charged by other credit unions and banks.

“For small farmers, it’s better to do a percentage basis as opposed to a flat rate,” Shamp said.

Alternatives are always popular

Despite the growth in options, some Vermont cannabis companies are looking out of state for their banking operations.

Silberman said GFA Federal Credit Union in Massachusetts has a subsidiary called Lighthouse Biz Solutions that accepts applications from Vermont businesses with a cannabis license. (GFA said it was unable to schedule an interview in time for this story.)

Dama, a San Francisco-based financial company, is working with Lead Bank, a Kansas City-based national digital community bank, and other banks, to offer services to licensed cannabis businesses. Charles Weiler, account manager at Dama, said the company has about 20 customers in Vermont.

“Their fees are significantly lower than the credit unions here in the state,” said Dama user Lauren Andrews, who applied for a retail license for her Montpelier store, Capital Cannabis. “The fixed costs of running a cannabis retail store are extraordinarily high, so wherever you can save money, you should.”

And then there is the money.

For small producers, one option is not to open a special bank account at all. Subin said some small producers choose not to deposit money in a bank.

“A lot of producers say, ‘I’m not going to pay $1,000 or $1,500 a month in bank charges,'” Subin said. use to buy groceries and clothes for my children.”

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