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Beyond Square for CBD Processing

Jan 14, 2020 · 5 min read

The ability to accept credit cards is a primary function of your business. Yet for CBD business owne r s this is not the easiest of tasks. The last year has seen a roller coaster since Elevon entered and then promptly exited the market. At that time Square started their invite-only Beta Program and by the Fall they had expanded it to allow all CBD companies to apply. Let’s explore where to next if you were not accepted into Square’s CBD program; are awaiting a reply to your application; have been shut down by Square, or are looking for options beyond Square.

Stability Should Not Lead to Complacency

As of this writing in mid-January 2020, the CBD merchant processing space has reached some point of stability. It has taken many months to reach this point, and if the Square option for CBD processing were to go away at any time in the coming year, it would likely wreak havoc on the emerging CBD industry. It would take some time to get all of those companies onto other compliant solutions and the backlog will be significant. What we currently see as 1 to 2-week onboarding times will balloon to 1–2 months, especially for start-ups without proven volume.

Square has many benefits from a simple application, a full suite of services with the point of sale integration, and some of the lowest processing rates for CBD. However, for those who are just now applying they currently have around a six-week waiting period since they are so backed up. Once companies are up and running they can also be shut down and when that happens there is no court of appeals. Getting shut down means a company loses their ability to accept credit card payments until they have been approved by another compliant CBD processor and then have that solution integrated into their business, whether it is online or retail sales.

Processing History and Volume

There are three types of CBD companies and how to proceed depends on which category one falls.

  1. Those with processing history and monthly volume exceeding $50,000.
  2. Those with processing history and monthly volume over $10,000 but less than $50,000.
  3. Those with no processing history or monthly volume less than $10,000.

Looking Out For Large Retailers

For those who have high revenues, they will be the first ones picked up by other processors who prioritize by volume. However, even a week without credit card processing would be a significant loss for the company. They need to consider the value of finding alternatives and getting back up credit card processing in place so that there is no disruption to their business. The rates for the other solutions goes down based on the volume, so they are likely to get the best rates which may in fact be comparable to Square.

Hedging Bets for Healthy Companies

For those who are in the mid-range, they will also be able to get onto other processing solutions with relative ease within a week or two. Similarly, being without processing for a couple of weeks could hurt the company. Looking into other high-risk processing solutions and making the transition might ultimately prove to be in their best interest. The rates and fees might be a bit higher than Square but the security that it can provide may be well worth it.

Reducing Start-Up Risk

Lastly, the ones who have less than 3 months of processing history or historic history of less than $10,000 will have the hardest time finding credit card solutions. This is the group that needs to be the most pro-active in getting onto other solutions before the tidal wave hits. The sweet spot is once they have 3 months of processing statements, the need to prove themselves lessens. Otherwise, they need to be prepared with business plans, bios, and proof of capitalization. The acquiring banks who support these high-risk solutions want to have the confidence the CBD business will be up to $10,000 volume within 90 days.

There are 5–7 Compliant Solutions

There are just a handful of compliant domestic credit card solutions and one popular offshore solution that are wrapped and sold by hundreds of agents, and many of them work with each other. The key is to make sure that your company has a good relationship with a team that can help. If any of this becomes industry-wide issues existing relationships will serve you better than looking to establish new relationships in the face of a crisis. This can be affirmed by anyone who was released by Elavon last Spring and was one of 40,000 businesses looking for a new solution, with only a handful of options available at the time.

The Year Ahead

Will Square be accepting CBD business a year from now? It’s probably anyone’s guess. But does your business really want to take that chance knowing that it might not be the most secure solution for your business? Look at the future and see if it is worth it for you to be paying a bit more for a solution that removes your risk of losing credit card processing and not being able to easily replace it in the face of thousands of other companies faced with the same issue.

Build Your Team Now

Our business is focused on compliant banking, and some of the other solutions do require CBD merchants to have a transparent banking relationship. Those who are hiding their business from their bank may also get caught in the tangle in needing to secure a compliant bank before they are able to apply for another merchant processing solution. Our message is to think through all of your needs and not get complacent when it comes to banking and processing. This is not easy and it is not likely to get easier. Getting ahead of it and knowing your options is by far the best course.

If you want to get a rundown of the lay of the land beyond Square — feel free to reach out.

Let us help you grow your Business

Philippa Burgess is the Co-Founder and COO of MMJ FinSol, a financial solutions company serving the Cannabis, Hemp, and CBD industries. She can be reached at [email protected]

MMJ FinSol

MMJ FinSol provides banking, credit card processing, and financing for cannabis, hemp and CBD companies.

The ability to accept credit cards is a primary function of your business. Yet for CBD business owners this is not the easiest of tasks. The last year has seen a roller coaster since Elevon entered…