The Growing Marijuana Industry
6 Challenges Hemp Companies Face
Hemp, CBD and cannabis industries represents a major opportunity for entrepreneurs. Those entrepreneurs that are experienced in operating a hemp business know that while the work can be hard and challenging, the opportunities and rewards are great. Often challenges are centered on regulations, licensing requirements and scrutiny that is all too common in this sector.
As professionals who work with many clients we hear many of the challenges that owners have. Ralf Kaiser is the Senior Vice President of Integrated Compliance Solutions (ICS) while Chris Nani is a Cannabis Consultant and Co-Founder of CannaRev Solutions.
Top 6 challenges in the current cannabis industry.
1.) Bank Account: Getting a simple back account for hemp businesses has been a challenge. Banking is expected to continue to be challenge even with the passing of The Farm Bill. Running an all cash business can be dangerous and costly. The costs of running an all-cash business are high with some estimates being as high as 5% of total sales Many recently articles have said that banking is not possible for hemp or cannabis businesses. But banking is possible and more banks are accepting our sector as customers.
2.) Debit Cards: Recently ICS has been contacted by many hemp and CBD companies that said their debit card companies had shut them down. This is an unfortunate, but a strong trend in the industry right now! One of the major domestic banks that accepted CBD and hemp clients stop taking business. This left many hemp and CBD operations without debit processing Thankfully, there are other domestic solutions that are available right now and more coming in 2019 that will specialize in the cannabis, hemp and CBD sectors
3.) Payroll: One of the major U.S. payroll providers has decided to exit the industry. This has left many cannabis and hemp businesses without payroll. The payroll challenge is also linked to the bank challenge as payroll services are nearly impossible without the proper traditional banking services. Where one payroll provider exits the industry, another one enters: ICS has partnered with a major payroll provider and we can refer potential clients to them via our contact form on our website. Just click here.
4.) Legal Ambiguity: The 2018 Farm Bill recently legalized hemp and CBD at the national level allowing states to decide how they want to treat each. Many states already have laws allowing hemp production but some still do not, which begs the question what happens to consumers who bring CBD into illegal states?
In addition to states deciding how to treat hemp and CBD, no single regulatory agency has control over hemp and CBD products. The Food and Drug Administration (FDA) has yet to issue a statement on how it will handle CBD-infused food products while the Drug Enforcement Agency (DEA) does not know what to do now that hemp-derived CBD and marijuana-derived CBD are identically the same.
5.) Lack of education: The average American is unaware of the versatility of hemp and all of its uses. Because there is a lack of public knowledge, the hemp industry has been hindered and often mischaracterized as a psychoactive substance like marijuana. Hemp can be used as substitute in food, clothing, and construction and does not provide any “high”. Hemp was once an influential part of American society, like when the U.S. government released Hemp for Victory, a World War II film encouraging farmers to grow hemp to support war efforts. Hemp has been used since the start of the United States and was an original sources for paper, rope, and cheap animal food.
6.) Reputation: Richard Nixon’s 1980’s “War on Drugs” has had resonating effects to this day. Banks like Bank of America or Chase are hesitant to enter the hemp industry because of the legal ambiguity and stereotypes still lingering around cannabis as a whole. Banks have historically taken conservative approaches to new markets and are one of the slowest industries to adapt.
Along with all of the laws prohibiting working with cannabis businesses there are enough buzz words to scare banks away from the hemp industry with possible civil and criminal punishments. Once banks have assurances there will be no repercussions for banking with the hemp industry bigger banks will likely enter the market space. Currently, Congress has attempted to introduce legislation but no meaningful progress has been made yet.