This summer, Brattleboro Savings & Loan and the Vermont Federal Credit Union entered Vermont’s burgeoning recreational cannabis banking business, bringing to four the total number of financial institutions willing to push through the regulatory hurdles to serve the new businesses in Vermont.
With the first retail stores planning to open Oct. 1, some cannabis businesses owners — especially smaller growers — say that despite the growing number of options, they are still looking out of state for services that meet their needs. Others say they will just operate in cash for now.
Dan Yates, president and CEO of Brattleboro Savings & Loan, said the bank started opening cannabis business accounts in June. Today, the bank is serving five businesses and growers, along with one retailer, while another nine or 10 businesses are awaiting their licenses from the Cannabis Control Board before their accounts can become active.
Vermont Federal Credit Union has been accepting cannabis 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 cannabis businesses, he said.
“We’re excited about the opportunities that it may provide,” Fisher said.
Vermont State Employees Credit Union has the longest experience serving cannabis businesses, having all five existing medical dispensaries as clients, said Greg Huysman, director of business lending. This year, the credit union has opened 80 new accounts for recreational cannabis businesses, he said, most of them growers.
VSECU members are currently voting on a proposed merger with New England Federal Credit Union, the fourth financial institution on the list.
Yates said that if all goes well, Brattleboro Savings & Loan would like to be the go-to banking institution for cannabis businesses south of Route 4. But for now, the bank is limiting cannabis customers to those located in Windham County and eastern Bennington County, where it has a branch in Winhall.
“If it’s too far out of that market area, for the time being we won’t bank it, but we’ll see,” Yates said. “It’s dipping the toe in the water before jumping in the water completely.”
More than one bank can handle
Cannabis continues to be illegal under federal law, and the Vermont regulatory environment is new. As a result, Brattleboro S&L estimates that it needs one full-time employee specializing in compliance with federal regulations for every 15 accounts, according to Yates. Right now, Brattleboro S&L has one employee familiar with related federal laws, with a full-time assistant who will also be monitoring cannabis accounts.
For VSECU, staffing all the new accounts was also challenging. The credit union has put a pause on opening new cannabis accounts.
“It was tough to project how much market share we’d get off the bat,” Huysman said. “Our success has been greater than we can handle right now, so we just need to line up more resources and then the intention is to reopen our cannabis membership openings.”
The impact of that decision has been felt by growers and retailers across the state.
While Ana and Josh MacDuff, owners of Mountain Girl Cannabis, a retail shop in Rutland that received the state’s first license for a retail recreational cannabis shop, were able to get an account at VSECU, grower and retailer Scott Sparks was not.
Sparks had been banking with VSECU for two of his other businesses, but he said when he applied for an account for his cannabis cultivation business, he was turned down. So he went to Brattleboro Savings & Loan, and that is where he will also be banking for his cannabis retail business.
Merger impacts debated
Merger critic and former VSECU board member Jerry Diamond believes the decision to pause taking new recreational cannabis accounts came out of fear of federal regulators stopping the proposed merger.
“To say they were suspending the taking of any new accounts and the reason was they didn’t have enough staffing literally cannot be true,” Diamond said, pointing out the two years that banks and credit unions have had to prepare since the Legislature legalized recreational cannabis sales.
Huysman disputes that vehemently. That concern was not a factor, he said, pointing out that New England Federal Credit Union already has some cannabis businesses as customers. “And they plan to continue that business and this merger won’t change that at all,” Huysman said. “It’ll line up more resources for us to take care of more cannabis businesses.”
Andrew Subin, a Burlington attorney who represents cannabis businesses, is now referring his clients to Vermont Federal Credit Union as well as to Brattleboro Savings & Loan. He said he is steering his clients away from the remaining option, New England Federal Credit Union, because of the pending merger.
John Dwyer, president and chief executive officer of New England Federal Credit Union, dismissed that concern. He said federal regulators have already approved the merger and the credit union has concluded that it can continue to offer cannabis banking services if the merger goes through, he said.
More banks, fees still high
Subin also said he’s referring clients elsewhere because New England Federal Credit Union’s “fees are kind of exorbitant.”
“We don’t believe our fees are high,” countered Dwyer. “These accounts are most commonly the type of account that require regular reporting that we need to report and we’ve built the pricing to recognize the costs associated with that support.” He declined to reveal specific fees.
Brattleboro Savings & Loan charges different monthly fees for growers, manufacturers, retailers, wholesalers, testing facilities, and businesses with integrated licenses. The amount charged also depends on how large the business is, Yates said.
So far, the southern Vermont newcomer seems to be offering the most competitive rates, Subin said.
But the biggest determinant of cost is the size and complexity of the business structure.
Karen Devereux, a grower in Barton, said she and her husband opened an account at Vermont Federal Credit Union after VSECU turned them down. Devereux and her husband are growing 125 outdoor plants and 1,000 square feet of indoor plants, which puts them in the smallest category of growers.
For growers of that size, the credit union charges $100 a month to have an account, said Fisher. But customers with more than one type of license are charged many times that amount.
Devereux and her husband are also pursuing a manufacturing license and a retail license.
“It’s very costly,” she said. “It’s going to cost us $2,000 a month to have a bank account.”
Huysman said VSECU charges a variable rate based on the size of a customer’s deposit. For smaller customers, it is 1.5% of deposits, he said.
Dave Silberman, a Middlebury attorney who represents cannabis businesses, said he has been steering clients away from VSECU for the past few months because he felt that its fee structure is too high.
But for Wyeth Shamp, a small cannabis grower in the town of Georgia who is banking there, that works out to less than the fixed fees charged by other credit unions and banks.
“For smaller farmers, it’s better to do a percentage basis as opposed to a flat fee,” Shamp said.
Alternatives are still popular
Despite the growth in options, some Vermont cannabis businesses are looking out of state for their banking.
Silberman said GFA Federal Credit Union in Massachusetts has a subsidiary called Lighthouse Biz Solutions that is accepting applications from Vermont businesses with a cannabis license. (GFA said it was unable to schedule an interview in time for this story.)
Dama, a San Francisco-based financial company, works with Lead Bank, a national digital community bank based in Kansas City, and other banks, to offer services to licensed cannabis businesses. Charles Weiler, an account executive at Dama, said the company has about 20 Vermont customers.
“Their fees are significantly lower than the credit unions here in the state,” said Dama user Lauren Andrews, who has applied for a retail license for her store in Montpelier, Capital Cannabis. “The fixed costs for running a cannabis retail store are extraordinarily high, so anywhere that you can save money, you have to do that.”
And then there is cash.
For small growers, one option is not to open a special bank account at all. Subin said some small growers are opting not to deposit money in a bank.
“A lot of the growers are saying: ‘I’m not going to pay $1,000 or $1,500 a month in bank fees,’” Subin said. “I’m going to take this cash and keep it in a safe in my house and use it to buy groceries and clothes for my kids.”