On our show yesterday, we talked with John Davis, who runs a legal medical marijuana business in Washington state. He described one of the big hurdles of starting a legal marijuana business: It's really hard to get a bank account.
His story reveals not only the gray area the marijuana business still inhabits (it's still illegal under federal law), but also just how hard it is to run a small business without a bank.
Here are four key steps Davis recommends, based on his own experience:
1. Buy three safes. One for "bulk product," one for "inventoried, ready-for-sale product," and one for cash. "If you put your cash in with the cannabis, it will end up smelling like cannabis, and when you go down to the bank, I guarantee you're going to have a talk with the manager of that bank."
2. Get an ATM — and be prepared to stock it with cash yourself. Credit card companies may not want to do business with you. Same goes for the companies that run ATMs in small businesses. "The companies that traditionally maintain ATMs will not stock your cash," Davis says. "Why? Because it's possible that the federal government will come, break down the door and take that cash."
3. Find angel investors. No bank is going to give you a loan to start a weed shop, even if it's legal.
4. Create a shell company. Banks don't want to do business with weed shops. But they don't mind opening accounts for legal corporations whose business dealings are vague. "I had to be colorful with the way that I opened my account," Davis said. "I don't feel great about having to toy with the truth, but it's essential for me to have banking. I'm a business."