Banking and Hemp
We got the following comment as a result of yesterday’s blog post:
“My banker informed me that if any of their customers are growing hemp, that they will close all their accounts.”
That sentiment is still out there for many banks. However, I must admit if I had a banker tell me that, I may be looking for a new banker or at least find out what causes the banker to say that.
Many banks, especially if they do not specialize in Ag Lending may not be aware that Hemp is now a legal crop and is to be treated just like corn, wheat or soybeans. This assumes that the farmer is licensed correctly by the state and follow the rules.
We find that many banks just don’t want the hassle even if it is legal. Others are waiting for additional regulations to be issued which the new proposed regulations from USDA issued earlier this week will help in that area.
Other banks are already actively providing loans and banking services to the hemp industry including several larger national banks.
It may be prudent to put your hemp operations into a separate legal entity. This entity would only deal with hemp activities and if the bank does decide to close the account, it only affects one account.
However, this is certainly in a state of flux and it may take time and effort to get the banking industry fully engaged and accommodating.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
This is an area I am totally unfamiliar with, but this industry, as in many areas of the country, is growing like weeds (pun intended). I have two questions based on discussion with people in the industry. Perhaps the banker in AZ, or any other legal mind may have some input. Fact or Fiction?….
1) Since this is still federally unlawful, and banks are FDIC insured, could they lose their FDIC backing as a result in participating in a federally illegal industry? I’ve know businesses in the service industry (electricians / air conditioning) who work on such businesses and get paid in cash ($40k -$50k), and the banks will not accept their deposits if they find out the source of the funds. And yes… some have had their accounts closed.
2) I’m told carrying cannabis across state lines can be a federal offence. Could the transferring of funds related to this industry across state line be considered a federal offence?
We live in interesting times. I’m curious and look forward to your responses.