Finding CBD Merchant Accounts to Sell CBD Products
Ability to sell CBD
Having the ability to
take payment for the product and service rendered is not easy, far from easy,
but this will help straighten out the process and give you a much deeper understanding.
We see a lot of news about the banking process “easing” up, but in reality,
it’s not yet.
Having an online business
or any business for that matter requires payment unless you are just charitable.
And in the CBD world, to put it bluntly, it is much, much harder than normal
High Risk categories such as the “normal” high risk categories. First off,
online sales, is automatically in a tier of its own, makes no difference if it
just teddy bears, clothing, and things some would never consider “high risk”,
so why is this? Simple. It’s an online transaction and a “not in person”
transaction, which leaves the transaction, no matter how innocent it may seem, in
a high risk category. In person transactions, you can ask to see ID, be able to
visually spot something not right, etc., but online, you have no idea who it
is. And banks, well, to them it’s a risk of a higher nature – credit card fraud
is largely to blame.
How banks view CBD.
Banks do not like
cannabis, plain and simple. Straight to the point of their view on CBD and
other related products to Cannabis. They, no matter how much they are worth,
just do not like providing assistance with any business selling CBD. And it is
simply due to the laws in this country, so much the bank itself.
There is no way around this.
So if you own a store front, you might a bit shocked to learn that in the event
you want to dip into the worldwide web you WILL be paying more than “in
person”. Instead of the 1.75% you might pay now, expect the rates to be from 2.75%
to as much as 10% per transaction.
Enter CBD products. There is this large grey area and this is largely in part, even though federally legal. It is frustrating to all involved, even to the big companies as they are paying into this category of “high risk”. But as they are more established, and process much more, the banks available are more attainable and much more willing to negotiate. So don’t think just the smaller companies are the ones that have the hardest of times. But as the expression goes, “Money talks… and…” well, you know the rest.
Listen to others who been
through the process.
From experience, I can
tell you that most of the time, the bank will need to see that you have
inventory on hand (IOH) with respectable lab certificates and wholesale proof
of purchases. This is where the “rock stuck in a hard place part” starts. So
after establishing the legality of your business, you have to invest in
product, then you can start to really play ball. The more stock you have, the
more likely they can assist, as they see the stock as a sign of seriousness and
profit for them.
Buying a few products
just will not cut it, unfortunately, so it is best to buy as much as much as you
can first, but remember, you will also need a “live” website, one that is built
on a platform that is friendly to the banks software needed on your site. So
please, make sure your site is built on something such as WordPress/WooCommerce,
Magento, or BigCommerce. Shopify, is slowly easing its way in to the crowd, but
it’s still not as processor friendly as the big three mentioned.
Knowledge is power.
Thankfully I knew this
portion as I dealt with high risk products prior to CBD, so I already had an
idea, and I hope I am conveying that to you now, so later down the road you are
not stuck in a costly bind! I am sure there is not too much that is more
frustrating than buying $10-25k in product only to find out that your well
built site is not compatible with the banks that are willing to take on new
Also, I would like to add
if you are still with me, that a processor is simply a bank that processes the
payment. They are not, however, the bank that the money after processed goes
to, that is a Merchant Account. And unfortunately, big banks such as the Chases
and TD Banks of the world will not accept process nor “hold” money for CBD or
anything hemp related. For this you would need to find a CBD compliant bank.
They are out there but there aren’t too many, most of them are branches offs of
larger banks, but hold their own liability and charge for such a service, normally
a hundred or so a month. the fee is considered a “compliance fee” which
basically means, they watch the regulations and make sure your money does not
get frozen or get you kicked out, because if that happens, now your processor
that you worked so hard to get, will have no where to put the money they
processed. Stick with me, it sounds and is, a bit complex.
How to find a bank.
Simply put, they are not put out in the public and have access usually through brokers and other agents, who will research your business, charge a fee for doing so, usually in the neighborhood of $750 – $1500. Once on board, the compliant bank will most likely charge a monthly fee as well, in the neighborhood of $150. That is $5 a day, regardless if you are selling anything or not; keep that in mind when budgeting. Also say another $5 per month for the processor, so in total that is $10 daily, 7 days a week that you are paying to accept money. So when buying CBD products also keep in mind, when it comes to negotiating price of product, that every single percentage point matters.
There are other ways
around this such as off shore, but at the point it gets even more entangled,
the prospect of having a bank and processor off shore is not too advantageous.
For several reasons, the strongest reason is being the fact, that legalities
can prevent you from bringing the money “home” to your personal checking
account. But not to fear, as regulations straighten out, this will be easier.
But the point is that I want to drive home, is this is the foundation of your
business. Even if you only accept e-checks, same thing applies.
I have seen a lot of companies only accept crypto currency and this helps if you are ok with the limitations the crypto currently holds and the fact that crypto itself may be a risk on its own. But I firmly believe if you go the best path possible by obtaining CBD products that are legitimate and trustworthy and stick to oils (most processors do not like CBD flower), it may take a while but you will get in, just prepare for “fee land” as everyone has their hands out, it’s not like opening the teddy bear store or remotely close. As you can, by now, understand I hope.
Proper banking is your company’s
Once you have these two
crucial keys of this CBD equation, you can breathe a bit easier but remember
the fees, do not forget them. The banks surely will not, I can assure you that
one. If sales are not coming in yet to cover these fees it’s important to
reciprocate this to them, let them know what your game plan is and try to
convey (as if they do not know) the game plan. This goes a longer way than one
may think, usually the bank account manager on the account has a better
understanding of the difficulties of selling CBD product and especially online.
Research online and pay
It is important to research mostly brokers that are in the business of setting you up to be able to accept money for CBD products. It is also important to know the high interest rate is nowhere near enough at the moment to satisfy processors. The very few that are out there and willing to help and take on your business know that they are in the very few and charge a premium for this, so know this upfront will help you and your decisions now and down the road. Some possessors also will impose what is called a “rolling reserve”, contracts that may be costly to get out of, monthly fees for the software, and higher than average “per transaction charges” (example 6% plus $0.75 per transaction). It all adds up to a lot of money for selling a federally legal, non-intoxicating, dare I say “healthy” commodity, such as CBD oils and anything Cannabidiol related. It’s made much easier for those who invest $10 million into perhaps their own line up of CBD products (CBD oil, CBD pain relief salve, CBD flower, CBD skin beauty, CBD anything).
The price of selling CBD
It certainly is not easy,
it certainly is not cheap, and this is part of the reason CBD oils and salves
and all the other goodies, are at somewhat premium priced. You see it’s not
really so much the CBD that is expensive. It is fair to say it is the banking
system and regulations imposed by states. CBD is legal, but there is a grey
area being that even though industrial hemp is fully, LEGAL of a Federal level,
it is being extracting from the CBD flower, and making it into something else
in a way. This is costly as well, but I would the process is very little in
comparison to the banking process. You can go months without selling anything,
but still keeping the coffers happy. But the consolation is that you in the
business before the boom, and the boom it is. And no signs of slowing down, but
the future projections are based off what we see now, we never know what is coming;
simply put selling CBD products online is daunting, not easy, but if you pull
through, it is rewarding like any other high risk gamble.