Banks too paranoid about pot industry, advocates say
Retailers unable to open accounts at major lenders
• The refusal of Canada’s major banks to work with the legal cannabis industry represents a troubling lack of accountability while bolstering the black market, say industry advocates.
The problem is so bad that even the Cannabis Council of Canada, the Ottawa-based organization that lobbies on behalf of licensed cannabis businesses, can’t open an account at any of Canada’s five big banks.
“We don’t touch cannabis, we work with regulated players,” said George Smitherman, president and chief executive of the council. “Still, the only (bank) we can get an account from is Alterna Savings.”
And even that doesn’t come cheap, he said.
“Because we’re in the cannabis space, they charge us $4,000 per year and $100 a month for basic banking services, and I’m talking about an organization with less than $1 million in annual activity,” he said.
Accessing banking is a well-worn problem for Canada’s licensed cannabis players.
As the country enters its sixth year of legal weed, Canada’s banks still have no interest in doing business with those who legally deal pot, or even organizations merely related to cannabis.
Upon opening his successful chain of Maryjane’s Cannabis shops in Toronto, Sam Gerges couldn’t even find a bank willing to let him open a business bank account, much less provide access to loans.
“We have zero dollars in debt, yet we can’t get a single loan,” said Gerges.
Since opening his flagship Etobicoke store in 2020 — ironically in a former TD Canada Trust bank branch — Gerges’ business steadily grew, eventually expanding to stores in North York and Oshawa.
“You have to go with private (lenders) in this industry,” he said. “Institutional lenders do not exist.”
One bank initially offered services to cannabis businesses, Gerges said, but with fees in the thousands, it was prohibitively expensive.
“We’re now doing over $10 million in revenue, and we still can’t get a single loan from anybody,” Gerges said.
Nick Baksh, owner of Toronto cannabis retailer Montrose, said a lack of banking is yet another obstacle in Canada’s punishing retail cannabis framework.
“This issue is something (all cannabis retailers) can agree on,” said Baksh. “Excise is a tough one, parcel shipping in Ontario is a tough one, but I feel that just being able to have a normal bank account with the branch I’ve been banking with since I was 15, we should be able to do that.”
Lack of banking access, Smitherman said, has discouraged entrepreneurship.
Canada legalized recreational cannabis in 2018, but it wasn’t until the end of 2021 that sales in the legal market outpaced illicit weed in Ontario — Canada’s largest cannabis market.
“We talk about (entrepreneurs) frequently as a kind of cherished role they play in our society, but sadly in the cannabis space, we’ve got large Canadian banks that are more interested in how they look to treasury officials in the United States than how they look to Canadian business,” Smitherman said.
As Canada’s five big banks operate in the United States, Smitherman and others suspect their hesitancy is rooted in the fact that, despite nearly half of states allowing its recreational use, cannabis is still outlawed federally in the U.S.
The National Post asked for comment from TD Canada Trust, BMO, Scotiabank, CIBC and RBC Royal Bank.
RBC, the only bank to respond, said the legal landscape for cannabis around the world continues to evolve.
“RBC evaluates business relationships on a case-bycase basis, taking into consideration a number of factors to ensure compliance with laws and our internal risk parameters,” the statement read.
Canadian banks’ cannabis hesitancy spreads beyond business accounts.
Gerges said RBC — the bank where he maintains his personal accounts — rescinded a mortgage pre-approval once it discovered he owned a licensed cannabis business.
“I don’t own a house, I’m still renting,” said Gerges. “I go shopping, I get my pre-approval ... and then they’re like ‘by the way, we did some due diligence and we see your income is from cannabis, so we can’t do the deal,’ so I had to kill the deal.’ ”
When legal operators see illicit websites with free access to staples such as bank accounts, e-transfer payment options and Canada Post shipping, Smitherman says it makes the benefits of going legit make even less sense.
“If you’re in the regulated space and you put up your hand and say ‘OK, I’m prepared to be regulated,’ the government’s got every rule and every tax for you, but if you choose to operate just on the other side of the line in the illicit space, there’s a lot more access to things,” Smitherman said.