Interest Bearing Accounts for Cannabis Business
Cannabis banking has always come with extra hurdles — federal restrictions, limited partners, and more red tape than most businesses ever deal with. That’s changing. As more banks open their doors to the industry, cannabis related businesses (CRBs) can finally be selective about who they bank with and especially which offers interest bearing accounts (IBAs)
Not all banking partners offer them, and even fewer offer them to CRBs. In this post, we’ll cover what IBAs are, what to look for in a banking partner that provides them, and how they could impact your bottom line.
What is an interest bearing account?
An interest bearing account is a bank account that earns a percentage of interest on your balance. Let’s say you have $10,000 in an IBA with a 2% interest rate — you’ll earn an additional $200 per year. But if you have $20,000 with the same rate, it’ll be $400. So, the higher the balance, the larger the return.
Plus, your money stays liquid. Unlike investment accounts, you can withdraw whenever you need to, with no fees or penalties.
Why should I open an IBA for my CRB?
Cannabis is a particularly cash heavy industry. But cash sitting in a safe isn’t earning its full potential. Even if you have opened a business checking account, your money still isn’t working while you’re away. With an IBA, your money is growing in the background without any extra effort on your part.
These returns also compound over time, adding up faster than you might think. You’ll have a nice sized nest egg to cover the expected and offset the unexpected — from operational costs and compliance fees to seasonal fluctuations and rent increases.
How do I find the best IBA for my CRB?
Now that you know what IBAs are and why they matter, here are five steps for choosing a banking partner:
1. Find a bank
Not all banks are created equal. Especially for the CRBs, it’s difficult to find a bank that offers interest-earning options because of federal regulations. So first things first, make sure your potential banking partner even offers an IBA.
2. Shop rates
Each bank will have different interest rates depending on account minimums, competition, and their own business models. Rates can change, so it’s good to know how often the bank reviews their rates and what might trigger an increase or a drop. Essentially, the higher interest rate, the more bang for your buck — literally.
3. Read the fine print
Monthly maintenance fees or excess transaction fees, withdrawal limits, and transaction caps differ between banks. Some are more lenient on how often and how much you can withdraw, but they may have high maintenance fees. Others may have low maintenance fees, but charge you a fee every time you go over your transaction limit. These could be a dealbreaker depending on your CRB’s cash flow and how often you need access to cash.
4. Evaluate the risk
IBAs are generally considered a low-risk savings option. However, you should confirm if the bank you’re considering is FDIC-insured and what their coverage limits are for IBA. The standard coverage is $250,000 per depositor, bank, and per ownership category, but again, each bank is different. This means that if the bank fails, your funds are protected up to the coverage amount.
5. Make sure they’re cannabis savvy
Beyond the numbers, your bank needs to understand the intricate ins and outs of the industry. A bank unfamiliar with CRB compliance can create friction — delayed transactions, account freezes, inconsistent policies — that offset benefits from a good rate. The tools they offer should also be conducive to cannabis with seed-to-sale and account integrations, a mobile app for when you’re on the go, and responsive customer support whenever and wherever you need it.
Why should I open an IBA with Dama Financial?
Well, there’s quite a few reasons.
Dama Financial was created as a banking solution for cannabis with the industry knowledge to protect your assets and help your funds grow. That means fewer surprises around compliance and transactions, and more money in your pocket, as well as a dedicated relationship management team who understands the day-to-day realities of running a CRB.
Dama account holders have the an opportunity to earn up to 2.25% interest* on IBAs — higher than typical rates offered to CRBs — because of our ongoing partnership with First Option Bank Member FDIC.
Choosing a bank for your cannabis business isn’t just about finding a bank willing to work with you. It’s about finding one that’s actually built to serve you.
If you’re ready to see what your reserves could be earning, reach out to our team to open an interest-bearing account with Dama Financial.
*Please get in touch with our team for the most recent rate information.