The problem is so bad that even the Cannabis Council of Canada, the Ottawa-based organization that lobbies on behalf of licensed cannabis businesses, can’t open an account at any of Canada’s five big banks.
And even that doesn’t come cheap, he said.
“Because we’re in the cannabis space, they charge us $4,000 per year and $100 a month for basic banking services, and I’m talking about an organization with less than $1 million in annual activity,” Smitherman said.
Accessing banking is a well-worn problem across Canada’s licensed cannabis space.
As the country enters its sixth year of legal weed, Canada’s banks still have no interest in doing business with those who legally deal pot, or even organizations merely related to cannabis.
Upon opening his successful chain of MaryJane’s Cannabis shops in Toronto, Sam Gerges couldn’t even find a bank willing to let him open a business bank account, much less provide access to loans.
“We have zero dollars in debt, yet we can’t get a single loan,” Gerges told the National Post.
Since opening his flagship Etobicoke store in 2020 — ironically in a former TD Canada Trust bank branch — Gerges’ business steadily grew, eventually expanding to new stores in North York and Oshawa.
One bank initially offered services to cannabis businesses, Gerges said, but with hefty onboarding fees in the thousands, it was a prohibitively expensive option.
“We’re now doing over $10 million in revenue, and we still can’t get a single loan from anybody,” Gerges said.
Nick Baksh, owner of Toronto cannabis retailer Montrose, said a lack of banking is yet another obstacle in Canada’s punishing retail cannabis framework.
“This issue is something (all cannabis retailers) can agree on,” said Baksh. “Excise is a tough one, parcel shipping in Ontario is a tough one, but I feel that just being able to have a normal bank account with the branch I’ve been banking with since I was 15, we should be able to do that.”
And without a bank account, Baksh lost out on accessing small business loans that would have made his formative years much less of a struggle.
This, Smitherman said, discourages entrepreneurship during a crucial period in Canada’s cannabis legalization.
Since Canada legalized recreational cannabis in Oct. 2018, it wasn’t until the end of 2021 that sales in the legal market finally outpaced illicit weed in Ontario — Canada’s largest cannabis market.
As Canada’s five big banks have significant presences in the United States, Smitherman and others suspect their hesitancy is rooted in the fact that, despite nearly half of states now allowing its recreational use, cannabis is still outlawed federally in the US.
The National Post sent invitations for comment to TD Canada Trust, BMO, Scotiabank, CIBC and RBC Royal Bank.
RBC, the only bank to respond to the Post’s inquires, said the legal landscape for cannabis around the world continues to evolve.
“RBC evaluates business relationships on a case-by-case basis, taking into consideration a number of factors to ensure compliance with laws and our internal risk parameters,” the statement read.
Gerges said RBC — the bank where he maintains his personal accounts — rescinded a mortgage pre-approval once they discovered he owned a licensed cannabis business.
“I don’t own a house, I’m still renting,” said Gerges. “I go shopping, I get my pre-approval … and then they’re like ‘by the way, we did some due diligence and we see your income is from cannabis, so we can’t do the deal,’ so I had to kill the deal.’”
Smitherman said Canadian banks are contributing to the erosion of legal cannabis entrepreneurship, especially ones requiring unnecessarily onerous security and criminal checks to even get a foothold.
“The prospect of being involved in the cannabis space is highly limited — people go through a tremendous array of security tests,” said Smitherman. “This is an area where the federal government, department of finance, banking regulators, etcetera, could definitely do more to create better conditions for the regulated cannabis space.”
And when legal operators see illicit websites with free access to staples like bank accounts, e-transfer payment options and Canada Post shipping, Smitherman says it makes the benefits of going legit make even less sense.
“If you’re in the regulated space and you put up your hand and say ‘okay, I’m prepared to be regulated,’ the government’s got every rule and every tax for you, but if you choose to operate just on the other side of the line in the illicit space, there’s a lot more access to things,” Smitherman said.
“When legalization occurs but access to financial services doesn’t follow and evolve, and then you see the illicit market frequently accessing things that you cannot even do as a regulated player, that’s really disheartening.”