You already know that partnering with the wrong payment provider can have terrible consequences. But no one plans on putting their business in danger, so how do you prevent it from happening? One way is by being on the lookout for these warning signs that a potential cannabis payment processor is shady.
They Offer Credit Card Payment for Cannabis
This is one of the most sought-after forms of dispensary payment processing. Everyone wants to accept credit card payments for cannabis. But the fact of the matter is that the branded card networks do not allow such transactions. Offering cannabis credit card processing in your business could put you and your business at risk, with the potential for fines up to $1,000,000 and 30 years in prison, not to mention the fact that these dispensary payment systems regularly go down. Read more about the perils of credit cards for cannabis here.
If your potential cannabis merchant processing partner is telling you that you’ll be able to accept credit card payments for cannabis, ask them how they’re doing it. Ask if this is a transparent solution, or if it involves lying to your financial institution. Remember, if there’s a negative fallout from using this cannabis payment solution, you’ll be the one who must deal with the consequences.
You Need to Give a Personal Guarantee
A personal guarantee is, as the name implies, an individual’s legal promise to repay any debts for a company. It gives an extra level of protection to credit issuers, but it can also put your personal assets at risk in the event of business defaults. Personal guarantees give access to checking accounts, savings accounts, cars, and real estate.
Due to the high-risk nature of the industry, it may seem normal for marijuana dispensary payment systems to require this extra guarantee, but it can actually be a red flag for a shady payment scheme. Look into the company you’re working with in greater detail and go with your instincts before you sign any personal guarantees simply to access payment processing for cannabis.
The Money Moves Overseas
If your money is about to become more well-travelled than you are, this is a serious warning sign. Whether your funds move through offshore processors or are based in a country overseas, it could mean that your money gets tied up outside of the US. If your cash does get stuck in another country, you’ll have limited recourse to get it back, waiting months and dealing with intense administrative hurdles. That’s if you even get those funds back.
When it comes to the cannabis industry, it’s best to avoid international workaround schemes. If someone is promising you dispensary payment processing through another country, be sure to ask how funds are repatriated and if there are contingency plans in place. Additionally, find out if there are foreign exchange costs and requirements. Better yet, work with a payment provider that can guarantee that your money stays in the US.
The Cannabis Payment Processing Is Unclear or Untested
As the cannabis industry grows, there are tons of new providers who are rushing in to make a quick profit. In their hurry to jump in, too many of them are offering substandard technology. If you’re unsure, ask them to explain how their processing works. If they can’t clearly explain it in under five minutes, chances are that they are working in gray areas.
Additionally, pay attention to how long a company has been around. It’s not to say that newcomers can’t be fantastic disruptors to the industry, but you may want to make sure that you have other payment processors in place as a redundancy in case they don’t work.
Trust Your Instincts
If something doesn’t seem quite right, or doesn’t seem like “normal” business practice, be wary. While cannabis is still federally illegal, state-legal marijuana is a legitimate industry that deserves legitimate banking and payments. Too many cannabis dispensary payment systems are still treating the industry like a back-alley deal. Help to move the industry out of the darkness and into the light by only working with reputable, legitimate partners.