You're probably not trying anything new if you're not making mistakes. The essential thing is to learn from past mistakes and avoid making them again. This is also true when it comes to cannabis payments. There are many shady cannabis payment options, but using them might put you in much trouble. We've heard scary stories from people who tried different cannabis payment methods before finding us, so let's learn from their experiences!
"In Russia, I ended up with $1.3 million in foreign reserves."
Many cannabis business owners find themselves with money locked up in foreign bank accounts. Most people we talked to have foreign reserves ranging from $30,000 to $120,000. However, the highest amount we heard about was $1.3 million in Russian funds.
What causes this to happen? The merchant, in this case, maintains an e-commerce site and accepts credit card payments for marijuana. They had to open an offshore merchant account, which required a particular percentage of rolling reserves, to have this choice. Several payment processors that accept cannabis credit cards have this restriction to protect themselves.
However, when the merchant receives more chargebacks and disputes, the merchant's rolling reserve requirements may increase. Instead of keeping just 20% in reserves, they may need to hold much more, especially if chargebacks and disputes increase.
Sprout Processing is truly an outstanding organization. Your funds are never moved offshore because all of our payment processing is done by American banks. We prevent disputes and chargebacks by ensuring sufficient funds in the account during transactions.Furthermore, with cannabis payment processing, most of our merchants never have to worry about rolling reserves.
"Our accounts receivables totaled $10 million."
In the cannabis industry, managing B2B payments is complicated because most transfers aren't made through standard channels. As a result, keeping track of expenses requested and which businesses still owe you money might be difficult. One company we dealt with had a problematic situation in which their accounts receivable totaled $10 million.
This is something Sprout Processing can help you avoid. Sending and receiving payments online is quick and straightforward with our B2B payment platform. You may also check when requests were made and when payment is expected using invoice and payment tracking. You can also set up reminders and notifications to help you stay on track.
"We're going back and forth between multiple suppliers who offer cannabis credit card processing."
It's a good idea to have redundancy in place with multiple payment sources if one fails. One merchant we spoke with has gone through three different credit card processors in the last six weeks. Each credit card cannabis payment option has failed, forcing them to move on to the next.
More companies offer cannabis credit card processing, but it's not a sustainable payment solution.When joining a new cannabis payment processor, there are often startup fees, reserves, transaction fees, and sometimes personal guarantees. In reality, utilizing credit cards in the cannabis market has significant risks.
Cannabis businesses are never required to provide personal guarantees to Sprout Processing. Our model is long-term and dependable, with a far lower risk of failure. Using Sprout Processing means you no longer need to search for new payment options. Your customers will appreciate the consistency.
"Our ATM was found to be involved in money laundering!"
Because cannabis has a long history of operating as a cash-based industry, shops must have ATMs on site. However, some people have gotten themselves into significant problems due to this. People often invent stories about where the ATM is, saying that it's "in a flower shop" or something similar. There are some establishments that partner with questionable payment processors to transform ATMs into platforms for conducting cryptocurrency transactions related to marijuana. Either of these "solutions" could be construed as money laundering, with all the ramifications that entail.
Sprout Processing can assist your company in removing cash from the equation. Going cashless has several advantages, including lower cash handling costs and reduced risk.
"My bank account has been suspended!"
This is one of the most prevalent problems we encounter. Several firms have had their bank accounts shut down once the financial institution discovered the nature of their operation. Tier III MRBs have even been known to lose their bank accounts!
Banks and credit unions want to reduce their risk. Banking a product that is illegal under federal law carries many risks. Some banks support the industry, but many companies hide their transactions. As a result, banks and credit unions have decided that it is safer to close those accounts.
Sprout Processing was created exclusively by, and specifically for, banking professionals. The financial institutions ready to bank the industry were our first customers. Banks and credit unions can better handle suspicious activity and keep your MRB bank account if you explain your transactions and the source of the money.
Do you require an MRB account?
Cannabis firms can get quite inventive when they don't have reliable ways to send or receive funds. While cash remains a standard mode of payment, other businesses have informed us about more odd payment methods. One company stated that they had received over $4,000 in pre-paid VISA gift cards, which had been wrapped in rubber bands and mailed in a box.
Both the sending and receiving businesses find this inconvenient. Consider the situation when you need to buy pre-paid cards to pay for business transactions at your local convenience store. This isn't a scalable, dependable, or long-term viable cannabis B2B payment option.
MATCH List
For many retailers, this is the worst-case situation. We've met business owners placed on the TMF or MATCH lists, which are VISA and MasterCard's blacklists. If your name is on these lists, you will lose your merchant account and may not be able to get one in the future. Even if cannabis becomes legal in the future, the impact on your social security number and business tax ID will stay with you.
While there is an appeals process for being placed on these lists, it can take years to resolve and may not result in the desired outcome. The more you use a shady cannabis payment service, the more likely you will be added to this list. As a result, the preceding example of cycling through many providers becomes even more perilous.
Sprout Processing can help you stay safe in this situation. Sprout Processing is entirely transparent with our financial institution partners since we take compliance very seriously. They are aware of the different types of transactions and adhere to a far higher degree of reporting and compliance. This makes it less likely for you to get caught lying to the bank or violating the terms of your loan agreement.
Everyone makes errors, but maybe now you'll be able to learn from them and prevent the same repercussions. Call us if you have questions about your cannabis payment solution or marijuana bank account. We will help you avoid common mistakes.
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