The cannabis industry is still operating within a cobbled-together financial system—one defined by workarounds, instability, and uncertainty.

Most major banks remain unwilling to work with cannabis businesses due to the risk and compliance burdens associated with serving a federally illegal industry. In 2014, former Safe Harbor Financial CEO Sundie Seefried helped establish one of the first scalable models for compliant cannabis banking, setting standards for how financial institutions interpreted FinCEN’s marijuana guidance. The framework outlined how banks and credit unions could serve state-legal cannabis businesses while still meeting their Bank Secrecy Act and anti-money laundering obligations, giving institutions the confidence to engage with the industry.

Today, Safe Harbor is led by CEO Terry Mendez. In an interview, he explained that the company has evolved beyond compliance and is building financial safety nets to protect cannabis businesses from operational disruption when a bank abruptly exits the industry, leaving clients scrambling to access their own capital. “We have more than one cannabis-friendly bank on our platform,” explained Mendez. “If, for whatever reason, one of those banks decides they want to exit the cannabis industry. We have a place for you to go that doesn’t disrupt the flow of your business.”

Mendez pushed back against the assumption that federal rescheduling, or even full legalization, would automatically open the door to large national banks. He noted that several fully legal industries—including gambling, cryptocurrency, and even businesses operating on tribal lands—continue to face persistent banking challenges. For major financial institutions managing billions or trillions in assets, perceived regulatory and reputational risks often outweigh the potential upside. As a result, Mendez said, it is typically regional and state-chartered banks, along with credit unions, that step in to serve these underserved sectors by capturing market share where larger banks remain unwilling to engage. He did add that while rescheduling doesn’t address safe banking, it sends the message that the federal government, under a conservative administration, sees a path forward.

Making Cannabis Banking Work for Financial Institutions

Mendez explained that Safe Harbor’s core value proposition is to remove the regulatory and financial burdens that keep most banks on the sidelines. In the company’s early years, its systems were under constant regulatory scrutiny, ultimately becoming a national benchmark for compliant cannabis banking. Today, regulators across the country rely on Safe Harbor’s platform much like banks outsource payroll to firms like ADP—maintaining responsibility for compliance while leveraging an established, regulator-tested infrastructure.

Rather than forcing banks to build costly in-house cannabis programs—which can require $500,000 to $1 million in staffing, software, and compliance investments—Safe Harbor enables institutions to “rent” a turnkey framework. The platform embeds enhanced due diligence requirements unique to cannabis, including verifying product SKUs, ensuring regulated supply chains, preventing youth access, and continuously monitoring license status. These are obligations traditional banks are not designed to manage, and that can cost thousands of dollars per account to maintain independently.

Mendez emphasized that Safe Harbor’s role is not just to vet cannabis operators but also to protect banks, lenders, and ancillary businesses, such as law firms, from sudden account closures. He pointed to recent real-world examples of businesses that were abruptly forced out of non-cannabis-specialized banks, jeopardizing payroll and operations overnight.

Growing the Network

Drawing on his background at Fortune 100 companies, Mendez said the cannabis industry lacks institutional infrastructure that other regulated industries take for granted. Cannabis operators often have limited access to capital markets, professional services, and back-office support, such as complex financial, accounting, and compliance responsibilities, which impede growth.

Large multi-state operators may require loans in the tens or hundreds of millions of dollars, amounts that many regional banks and credit unions cannot support. Mendez pointed to a loan syndication program they are working on that will allow multiple banks to bid on a loan to spread out the risk, an option commonplace in more mature sectors. Until cannabis companies can access the same financial and operational tools available to other regulated industries, he said, scaling will continue to require workarounds rather than standardized systems.

RULES, RULES, RULES!

Mendez described compliance as one of the biggest deterrents keeping regional banks on the fence about serving the cannabis industry. Most banks are not typically equipped to oversee cannabis compliance, including local jurisdictional rules, product restrictions, and preventing minors from accessing dispensaries. These requirements can vary not only by state, but by city and municipality, creating a patchwork of regulations that institutions must navigate to avoid penalties.

While many banks attempt to manage this complexity through software alone, Mendez argued that technology without cannabis-experienced guidance can create additional risk. Compliance systems may surface issues, but banks still need to understand how to interpret the data, respond appropriately, and communicate with regulators during audits. Without expertise, institutions can expose themselves to costly enforcement actions, especially in a high-stakes, low-margin industry.

Mendez noted that many operators are already in survival mode, with a growing number entering receivership, since bankruptcy isn’t an option because it’s a federal legal process. Failing to understand the regulatory “game,” he said, leaves businesses vulnerable to audits, enforcement actions, and financial disruption they may not be able to recover from.

Filling The Gap For New Entrepreneurs

For most entrepreneurs, access to startup capital is the most challenging part of getting a business off the ground, and SBA-style lending is largely unavailable without years of operating history and proven sales. This catch-22 stops many new companies from ever opening their doors. Mendez supports BIPOCann, an incubator program that guides social equity and minority entrepreneurs through the business planning process and helps them secure capital. He said he wishes there were more programs like it.

Mendez described this as a working-capital desert, where lenders are wary of early-stage risk and many first-time operators lack the experience or financial history banks are looking for. Even established cannabis-focused institutions say “no” far more often than yes. One way Safe Harbor is beginning to address the imbalance, he said, is by rethinking how risk is evaluated and shared. Syndicated and participation-based lending, typical in other industries, allows multiple lenders to split exposure on a single loan, making it possible to support newer entrepreneurs without forcing any one institution to shoulder all the risk.

But access to capital is only part of the problem. Day-to-day banking for cannabis remains unusually burdensome, with heightened transaction reviews, delayed wire transfers, and jurisdiction-specific rules that can change with little notice. Mendez pointed to situations where operators have suddenly lost access to funds due to processor exits or regulatory uncertainty, causing disruptions that can jeopardize payroll and operations overnight.

Mendez does not believe a single policy shift will solve those challenges overnight. Even with rescheduling or broader federal reform, banks will still need industry expertise to help establish compliant frameworks before meaningful capital flows into the sector. In the meantime, Safe Harbor plans to continue building services designed to reduce disruption where traditional financial institutions remain reluctant to participate. Until then, cannabis businesses will continue to depend on regional institutions, credit unions, and specialized financial partners.

You can hear Terry Mendez’s full interview here.

The post Building a Cannabis Banking Eco-System with Terry Mendez appeared first on Cannabis Industry Journal.