WYOMISSING — Customers Bank has begun providing commercial banking services to permitted hemp and hemp-derived cannabidiol (CBD) companies in Pennsylvania and New York.
The move puts the company at the forefront of serving an industry that is forecast to generate $15 billion globally by 2026, according to Larry Snow, senior vice president, commercial deposit services for Customers Bank.
“This is not just an opportunity to offer banking to farmers and processors, but it is an industry that means jobs. It will be generating a lot of money into the economy,” he said.
According to market projections by “Hemp Industry Daily,” the market for hemp-derived CBD may top $7 billion by 2023. CNBC reported in May, that in 2018, CBD generated U.S. sales of $390 million.
In 2018, global retail sales of hemp totaled $3.7 million, according to data analytics firm New Frontier Data.
As part of the initiative rolled out earlier this month, Customers Bank is providing legal hemp-related businesses and hemp-derived CBD companies with access to commercial checking, online and mobile banking, fraud protection, ACH payment, online wire transfer services and business bill pay.
“The hemp and hemp-derived CBD industry is in the early stages of development and having access to the same business banking products available to other market segments is critical to the long-term growth of this sector,” Richard Ehst, president and chief operating officer of Customers Bank, said in a news release.
Customers Bank will initially offer deposit services, but Snow said the company anticipates adding lending in the “near future,” although he could not yet provide a date.
With the passage of the 2018 Farm Bill, the federal government changed the legal status of industrial hemp, removing it from regulation under the Controlled Substance Act.
Industrial hemp and marijuana are different varieties of the same species of plant, Cannabis sativa, according to the Pennsylvania Department of Agriculture website. Marijuana is cultivated because of its production of the psychoactive plant chemical delta-9 tetrahydrocannabinol, or THC.
Industrial hemp is cultivated for fiber, seed and other purposes and can be used to produce CBD oil, paper, food, clothing, textiles, biofuels and construction materials. Federal and state law requires that the concentration of THC must be less than 0.3% in industrial hemp.
CBD oil has become an increasingly popular holistic treatment for chronic pain, anxiety and depression.
By establishing the legality of the industrial hemp, passage of the Farm Bill also made it legal for banking institutions to provide services to hemp and hemp-derived companies, according to Snow.
In Pennsylvania, there are 350 permitted hemp-related businesses for 2019. Some of those business owners have faced challenges in finding banks willing to take them on as clients.
Dale Norley and her husband Alan Uchin, have joined the growing hemp industry in Pennsylvania. The couple is a 2019 Pennsylvania permit holder, farming seven acres on their Tasunka Farm Organics in Birchrunville, Chester County. It is the first crop for the farm — 6,000 plants being grown for flowers and CBD oil, according to Norley.
Once they had their permit in hand, their plants had germinated and seedlings were growing, Norley said she wanted to get a checking account for the business.
She didn’t expect a problem. After all, they have a personal bank account and a business account for their other business — Purple Gem Jewelry. But two banking institutions — where the couple has accounts — said no.
Norley said in May, they first went to the bank where they have their personal account.
“They asked ‘what do you do,’ and we told them. After getting the manager, they said they couldn’t open an account for us,” she said. “They didn’t want to touch it.”
Rejection happened at a second bank, the institution where Norley and Uchin have their jewelry business account.
“They got up from the desk, said ‘no,’ and walked away. We have 20 years of banking with them,” Norley said.
Norley admits she didn’t expect to be told no.
“I had no idea, because it’s legal,” she said, adding that she just wanted to be able to write a check for things the business might need.
Norley said she had pretty much given up on getting a bank to take them on as a business client, resigning herself to using personal funds for the business. Then she got an email from Snow, who has been proactively reaching out via email to each Pennsylvania permit holder to let them know about the bank’s initiative.
“He took pictures of the fields, asked about our business model and helped us fill out the paperwork,” she said.
Norley’s Tasunka Farm Organics was the first business to sign up with Customers Bank.
“I breathed a sigh of relief when I found out there’s a bank that wants us,” she added.
Norley said they have used their credit cards to get the business going, an experience Snow said is not unique in the industry. Many of the permitted businesses are using personal savings, or working with investors groups, he said.
Tasunka Farm Organics is about three weeks away from its first harvest. Then, the plants will be hung to dry — a process that can take up to a month, before the crop is sent to the processor, which adds another three to four months, according to Snow.
“There has not been a lot of transactional business yet,” Snow said. “Those business owners using their own money will need somewhere to put their money.”
Another new business that has faced some banking challenges is 663 CBD, located at 344 King St. in Pottstown. Open for just a couple of weeks, 663 CBD was founded by 21-year-old Connor Fellin and stocks a variety of CBD oil products.
Unable initially to accept credit cards, Fellin said it has been a cash-based business so far. However, he told MediaNews Group Thursday that he will begin working with Envy Tech, a point of sale company based in Britain, which will process CBD payments.
“A lot of companies do not, but hopefully companies like Square will follow and make it cheaper on the small business owner,” he said, adding that the monthly cost for the software is $40.
In the meantime, Fellin said “hearing about a bank that accepts CBD funds is extremely exciting.”
Snow said because 2019 is the first year for permitted industrial hemp farmers and processors in Pennsylvania, Customers Bank took steps internally to be ready — including staffing up the bank’s compliance area to service the businesses.
The company has also created internal procedures and controls to provide services to legal hemp businesses while remaining in compliance with the law.
Among the steps, according to Snow, are site visits that include photos; making sure the business has the appropriate state permit as well as a certificate of analysis that the product is below the 0.3% level of THC.
“It is a lot but the opportunity is huge,” he said.