This summer, Brattleboro Savings & Loan and the Vermont Federal Credit Union entered Vermont’s booming recreational cannabis banking business, bringing the total number of financial institutions willing to overcome regulatory hurdles to serve new Vermont businesses to four.
The first retail store is scheduled to open in October. 1. Some cannabis business owners — especially small growers — say they are still looking for services that meet their needs despite the growing number of options. Others said they would only be operating in cash for now.
Dan Yates, president and CEO of Brattleboro Savings & Loan, said the bank began opening accounts for its cannabis business in June. Today, the bank is serving five businesses and growers and one retailer, while another nine to ten businesses are awaiting clearance from the Cannabis Control Board before their accounts can become active.
The Vermont Federal Credit Union has been accepting marijuana 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 marijuana businesses, he said.
“We’re excited about the opportunities it might offer,” Fisher said.
Greg Huysman, director of commercial lending, said the Vermont Employees’ Credit Union has the longest experience serving cannabis businesses, with all five existing medical dispensaries as customers. This year, the credit union opened 80 new accounts for recreational marijuana businesses, most of them growers, he said.
VSECU members are currently voting on a proposed merger with the New England Federal Credit Union, the fourth financial institution on the list.
If all goes well, Brattleboro Savings and Loans hopes to become the banking institution of choice for cannabis businesses south of Route 4, Yates said. But for now, the bank is limiting cannabis customers to those in Windham and eastern Bennington counties, and it has a branch in Winhall.
“If it’s too far from that market area, we won’t be saving it for a while, but we’ll see,” Yates said. “It’s about dipping your toes in the water before jumping fully into the water.”
More than one bank can process
Marijuana remains illegal under federal law, and Vermont’s regulatory environment is new. As a result, Brattleboro S&L estimates that every 15 accounts will require a full-time employee dedicated to federal compliance, according to Yates. Currently, Brattleboro S&L has an employee familiar with relevant federal laws and a full-time assistant who will also monitor marijuana accounts.
For VSECU, it was also challenging to staff all new customers. Credit unions have put a moratorium on opening new marijuana accounts.
“It’s hard to predict how much market share we’ll gain right away,” Huysman said. “Our success is greater than we can handle right now, so we just need to line up more resources and then intend to reopen our cannabis membership.”
Growers and retailers across the state are feeling the impact of the decision.
Ana and Josh McDuff, a retail store in Rutland, received a license for the state’s first retail recreational marijuana store, and Mountain Girl Cannabis owners Ana and Josh McDuff were able to get an account at VSECU, but Grower and retailer Scott Sparks did not.
Sparks had been banking at VSECU for two of his other businesses, but said he was turned down when he applied for an account for the cannabis cultivation business. So he went to Brattleboro Savings & Loan, where he will also save for his cannabis retail business.
Merger impact debate
Merger critic and former VSECU board member Jerry Diamond believes the decision to suspend new recreational marijuana accounts stems from concerns that federal regulators are halting the proposed merger.
“To say they’re suspending any new accounts because they don’t have enough staff is practically impossible,” Diamond said, noting that banks and credit unions have had to prepare for recreational marijuana for two years since the legislature legalized it. Sales.
Huysman strongly disagrees with this. That concern was not a factor, he said, noting that the New England Federal Credit Union already has some marijuana businesses as customers. “They plan to continue the business, and this merger isn’t going to change that at all,” Huysman said. “It will give us more resources to take care of more cannabis businesses.”
Burlington attorney Andrew Subin, who represents cannabis businesses, now refers his clients to Vermont Federal Credit Union and Brattleboro Savings & Loan. He said he was steering his clients away from the remaining option, the New England Federal Credit Union, because of the pending merger.
John Dwyer, president and CEO of the New England Federal Credit Union, dismissed such concerns. Federal regulators have approved the merger, and the credit union has concluded that if the merger goes through, it can continue to offer cannabis banking services, he said.
More banks, fees still high
Subin also said he referred clients elsewhere because “fees are a bit high” at the New England Commonwealth Credit Union.
“We don’t believe our fees are high,” Dwyer countered. “These accounts are typically the types of accounts that require periodic reporting, and we need to report on those accounts, and we’ve put pricing in place to recognize the costs associated with that support.” He declined to specify the cost.
Brattleboro Savings & Loan charges various monthly fees to growers, manufacturers, retailers, wholesalers, testing facilities and businesses with comprehensive licenses. The amount charged also depends on the size of the business, Yates said.
Newcomers in southern Vermont appear to be offering the most competitive prices so far, Subin said.
But the biggest determinant of cost is the size and complexity of the business structure.
Barton grower Karen Devereux said she and her husband opened an account with Vermont Federal Credit Union after VSECU declined. Devereux and her husband are growing 125 outdoor plants and 1,000 square feet of indoor plants, making them the smallest grower category.
For growers of this size, the credit union charges a monthly fee of $100 to open an account, Fisher said. But customers with more than one license need to pay several times that amount.
Devereux and her husband are also applying for a manufacturing license and a retail license.
“It’s very expensive,” she said. “Having a bank account costs us $2,000 a month.”
Huysman said VSECU charges variable rates based on the size of customer deposits. For smaller customers, it’s 1.5% of deposits, he said.
Middlebury attorney Dave Silberman, who represents cannabis businesses, said he has been steering clients away from VSECU for the past few months because he feels its fee structure is too high.
But for Wyeth Shamp, a small cannabis grower in Georgia, that’s lower than the flat fees charged by other credit unions and banks.
“For smaller farmers, it’s better to go by a percentage rather than a flat fee,” Shamp said.
Alternatives are still popular
Despite the increased options, some Vermont cannabis businesses are still looking for out-of-state banking.
Silberman said the Massachusetts-based GFA Federal Credit Union has a subsidiary called Lighthouse Biz Solutions that is accepting applications from Vermont businesses that hold marijuana licenses. (GFA said it was unable to schedule interviews in time.)
San Francisco-based financial firm Dama has partnered with Kansas City-based national digital community bank Lead Bank and other banks to serve licensed cannabis businesses. Charles Weiler, Dama’s account executive, said the company has about 20 Vermont customers.
“Their fees are significantly lower than the state’s credit unions,” said Dama user Lauren Andrews, who has applied for a retail license for her store in the capital, Cannabis, Montpellier. “The fixed costs of running a retail cannabis store are very high, so anywhere you can save money, you have to do it.”
Then there is cash.
For small growers, one option is to not open a special bank account at all. Some small growers choose not to bank their money, Subin said.
“A lot of growers say, ‘I’m not going to pay $1,000 or $1,500 a month in bank fees,'” Subin said. “I’m going to put the money in the safe at home and use it to buy groceries and clothes for my kids.”
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