cbd business online bankingDecember 15, 2021
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The 2018 Farm Bill essentially removed CBD from the federal Controlled Substances Act and the oversight of the Drug Enforcement Agency. Instead, it placed governance of the hemp industry and CBD oil in the hands of the FDA.
Hemp and cannabis are closely related; in fact, industrial hemp is actually Cannabis sativa L. The difference in name is mostly a function of a legal definition, which sets the threshold for THC content. The flowers of a hemp plant contain little to no THC, while the flowers of a cannabis plant (commonly referred to as marijuana) contain much higher levels of THC.
Industry analyst BDS Analytics predicts the U.S. CBD market will reach $20 billion in sales by 2024. This would be a major surge from $1.9 billion in 2018 (a 49% annual growth rate).
Tip: If you want to differentiate yourself from other CBD businesses, it's key to provide third-party lab testing results to validate the quality of your product.
Understanding your legal obligations and playing it safe is key in a highly scrutinized industry. While CBD businesses everywhere await clearer regulatory guidance, it is important not to craft your marketing strategy around the supposed benefits of CBD. It's also important to stay apprised of new developments as the FDA moves forward on crafting new regulations.
How to start a CBD business.
Further complicating the regulatory landscape is the 2017 approval of the CBD-based pharmaceutical Epidolex, an epilepsy medication that was approved by the FDA. Since CBD is a main ingredient in an FDA-approved drug, using it in food products without FDA approval could be illegal. Clearer guidance is sorely needed for CBD businesses to operate in compliance with federal regulations.
Overall, Slovik said, the formula for success is simple, even if the process is complicated.
The CBD and cannabis industry faces unique challenges that other industries don't. Most of these challenges relate to the regulatory environment and, as federal agencies like the FDA detail specific rules and guidelines, things should stabilize. For now, though, if you want to start a CBD business, you should be aware of these major considerations:
"I used to be a pro snowboarder … and I was always sore, my muscles were constantly in agonizing pain. I tried CBD, and it helped me tremendously," said Slovik. "Then, years later, cannabis … started coming to the forefront, and there was research and data backing up everything I felt on the mountain."
Some trends the CBD market might experience in 2020 are increased potency of products, more brick-and-mortar CBD shops, more pharmaceutical CBD products, and more access to products online through CBD websites and e-commerce shops. In fact, CBD online sales currently account for 60% of the sales channels.
The potential of the CBD industry has prompted many people to explore how they can launch a CBD business. The industry is not without its challenges, though, especially surrounding the evolving legal landscape, but the opportunity is significant.
Cory Slovik, owner of Core Roots CBD, started his company after experiencing firsthand what he said were the healing properties of the cannabinoid.
"In today's day and age, if someone is looking to sell a product, the normal avenues are Amazon, eBay, Alibaba or paid ads on social media," Slovik said. "In this industry, it's way, way, way different. You can't do any of those things."
"This industry has been more or less illegal for the past century," said Slovik. "At this point, there's major, major momentum. Many people are trying to break in, so don't follow the herd. You want to be a leader."
What is CBD?
Industrial hemp contains less than 0.3% THC, and as such, it is considered legal under federal law to cultivate, harvest and process into finished products. Cannabis, on the other hand, contains more than 0.3% THC (often much higher levels) and remains federally illegal.
Each of these challenges will likely be cleared up as more concrete regulation appears, but in the meantime, CBD businesses must remain adaptable and well-informed. Changes in the industry come on a day-to-day basis, so preparing backup plans ahead of time could save you a great deal of time and money should the worst come to pass.
If you've done any research into the CBD market already, you've likely encountered the terms "full-spectrum" or "isolate." Depending on the extraction methods used, the CBD oil obtained from the plant might contain other cannabinoids and compounds found in the source plant. This is what is known as full-spectrum CBD. Full-spectrum CBD not only contains other cannabinoids found in the source material, but compounds known as terpenes, which are responsible for creating the flavor profile, aroma and specific effects of the plant.
Still relatively new to the mainstream, cannabidiol, more commonly known as CBD, is becoming a household name. The purported therapeutic and health benefits of CBD, one of many compounds found in cannabis and hemp plants, has created a buzz. CBD oil has entered the marketplace in the form of tinctures, infused edibles, topicals and more. The growth of CBD oil products has been so immense, in fact, that industry analyst BDS Analytics predicts the U.S. CBD market will reach $20 billion in sales by 2024.
The key to gaining a competitive advantage with staying power in the CBD industry is to develop a high-quality product that will withstand the coming scrutiny of both regulators and educated consumers. If you want to differentiate yourself from other CBD businesses, it's key to provide third-party lab testing results to validate the quality of your product, Slovik said.
There are countless unique opportunities for new businesses to sell CBD. Starting a CBD business includes all the hard work and effort of launching any other company in addition to the uncertainty of a shifting regulatory landscape (and all the issues that accompany it). However, in a fledgling industry projected to undergo explosive growth, the heavy lifting today might be well worth it tomorrow.
Full-spectrum CBD vs. CBD isolate.
CBD products are generally created in several steps. First, the raw material needs to be cultivated and harvested. For example, if you plan on using industrial hemp to create your CBD products, you will either need to cultivate or purchase a large amount of the plant. From there, CBD oil is extracted from the plant using a variety of methods. Again, you can do this yourself or outsource the process to an extraction company. Once you have extracted the CBD oil, it can be sold as a concentrate or used to infuse a variety of products. Some of the most common CBD products on the market today include sublingual tinctures, infused edibles and topicals, like gels or creams.
CBD is found in both cannabis and hemp plants. CBD oil can be extracted from either plant and used to create CBD oil products. However, there is a key difference between hemp CBD oil and CBD products derived from cannabis: THC.
To successfully advertise and sell your CBD products, you will have to be creative. Establishing your own e-commerce store or carrying your products in a brick-and-mortar location is a must. Marketing your product with an organic search strategy and customer loyalty programs is always safer than engaging in paid advertising. And, of course, every market is a bit different, so do your research and understand your local and state laws.
In addition, Slovik said pursuing certifications like USDA organic, Good Manufacturing Practices and FDA facility registrations are important moves to instill confidence in consumers about the quality of the product they are buying.
Slovik soon launched Core Roots CBD, seeing a business opportunity and a way to help other people treat their pain. He said starting a CBD company is like any other business, plus a bunch of added steps.
CBD isolate, as the name suggests, is a concentrate that only contains CBD and no other cannabinoids or terpenes. While the purity of CBD isolate might sound desirable, there is some evidence to suggest that full-spectrum CBD promotes an "entourage effect;" that is, the compounds in a full-spectrum hemp extract work together to promote more significant effects. The entourage effect is still under investigation by researchers studying CBD and other cannabinoids.
Just because the 2018 Farm Bill federally legalized industrial hemp and, by extension, hemp extract, like CBD oils, doesn't mean there aren't significant regulatory considerations surrounding the industrial hemp industry.
Once a banking institution is secured, there is still a matter of ensuring that the account is secure and adhering to all CBD banking rules. Banking CDB and hemp related businesses requires experience and expertise which FLCBank can provide. And it is experience that will benefit you.
At FLCBank, we help business owners with their CBD banking. As a CBD business owner, we will work with you to make sure your business is always in compliance with our policies and federal, state, and local regulations. A cannabis business with proper banking solutions will have a better chance of success, and we want to help you get there. We understand the struggles of running a business strictly by cash.
Choose to bank your CBD business with a reputable financial institution like us at FLCBank. Our bankers are experts at finding the right financing solution for your business. We have a variety of accounts available to meet the needs of your business. Whether you are just starting out or have more sophisticated needs, we can grow with you as your business grows.
Set up your CBD banking account.
Opening a bank account may seem like a fairly straightforward task, but it can actually be a challenge for CBD business owners. It may even seem impossible sometimes for them to even find a bank that will accept their business. There are a few steps to keep in mind when setting up a bank account for your CBD business:
Although the market continues to grow and the demand for the product is there, many banks will not take on CBD banking or any cannabis-related businesses. At Florida Capital Bank (FLCBank), we are happy to work with CBD-business owners, and we welcome you to use our CBD banking services.
FLCBank is a leader in the banking industry focusing on solutions for the financial well-being of businesses and their owners, including those in the cannabis industry. We are a nationally chartered bank headquartered in Jacksonville, Florida with full-service branches located in Jacksonville, Gainesville, Orlando, and the Tampa Bay area.
FLCBank will assist you in opening your account as one of our specialists will guide you through the process. We’ll send you a questionnaire that will allow you to focus on the issues that matter.
Find a bank.
Our team of banking experts at FLCBank will help you get the right banking solution for your hemp or CBD business. We have an array of business banking options to help you achieve your business goals and aspirations. For more information check out our options at our hemp banking page.