Almost all entrepreneurs face challenges obtaining or retaining financing. But the obstacles Jill Lamoureux faces trying to get access to even the most basic financial services-a bank account for her business, for example, or a merchant processing account to accept credit and debit cards-have been particularly daunting.
"For a little while, I felt a little bit like a financial pariah," Lamoureux said. "I mean I had letters from three different financial institutions that said they didn't want my business and yet we have a business license and are completely legal."
Lamoureux's problems arose after the two banks and one credit union discovered the nature of her business. Lamoureux is one of the managers of Boulder County Caregivers, a medical marijuana dispensary and clinic in Boulder, Colo. And the regulatory conflict between conducting a business Colorado considers legal and the federal government considers illegal has effectively made her business too risky for most credit unions or banks.
Lamoureux said she first became aware of the problem around the middle of 2009 when she received a letter from JPMorgan Chase, her bank at the time, asking her to close her accounts because of the nature of her business. Then, over the next year or so, she opened accounts with and received similar letters from a smaller regional bank that has branches in Boulder and the $926 million Elevations Credit Union, a state-chartered credit union headquartered in Boulder. In each case, the financial institution made it clear, politely, that they didn't want to have accounts from medical marijuana dispensaries, Lamoureux explained, adding that she was not bitter about it.
"I am sympathetic with their problem," Lamoureux said. "I have some finance in my background and know what it can mean to have accounts that don't fit into easy categories. And bankers are conservative by definition, and that's a good thing. It's just been a bit difficult not having easy access to business accounts."
Lamoureux, said her business grosses over $2.6 million per year and that the lack of a regular banking relationship has meant having to deal with significantly more cash than she would like and not being able to obtain bridge loans that would enable her to more easily meet payroll during periods of lower sales.
"These kind of loans are a common place for small businesses, and it's just difficult not to have access to them," she said.
She said a recent consolidation among dispensaries in Boulder allowed them to have the same management firm and that firm had managed to secure banking services, but she wasn't sure how long that arrangement would last. Another bank offered her merchant processing on card transactions, generally by grouping her shop under "alternative health care."
"We're like chiropractors or acupuncturists," she said.
Elevations declined to comment on the specifics her case but confirmed that early in 2009 it had sent letters to about 100 of its members with business accounts asking them to close the accounts because their business involved medical marijuana.
"We didn't do anything precipitously," explained Edward Beckman, vice president of strategic communications for Elevations. "We made sure they had a lot of time to make other arrangements."
Beckman explained that Elevations had heard that some banks in town had begun to close down medical marijuana accounts because of regulatory concerns and decided to look into the issue. After the credit union's compliance officers had studied some of the potential downsides and risks, Beckman explained, Elevations decided it had to act.
Beckman declined to give examples of specific regulatory obstacles the accounts presented and stressed that Elevations did not believe anything it had done with the accounts had broken the law. But when the compliance office looked at what it might take to keep up with the accounts and make sure they did stray not over the law, Elevations concluded it wasn't worth it.
"We had precedent for our actions," Beckman said, explaining that Elevations also declined to open accounts for payday lenders or other business that involved similar short-term lending and Indian gambling operations as well. All of these were perfectly legal in Colorado, but the credit union just didn't want the risk or regulatory complications from working with them.