What’s in a Name?
The Challenges for Cannabis Businesses
In the UK’s burgeoning cannabis sector, many young businesses face significant challenges securing banking, payment services, insurance, and other essential business support. The root of the problem often lies in the name they’ve chosen for their company. Despite operating legally, businesses that overtly reference cannabis, CBD, or hemp in their names find themselves flagged as high-risk by financial institutions, insurers, and service providers.
Financial institutions are inherently cautious when it comes to perceived risks, and cannabis-related businesses often trigger red flags. Even though hemp and CBD are legal, there remains a stigma attached to the broader cannabis industry due to its association with illegal activities. Banks and insurers worry about regulatory scrutiny and the potential for violating the Proceeds of Crime Act (PoCA), which can result in significant penalties. Consequently, businesses with names directly referencing cannabis may find themselves unfairly lumped in with illegal operators, leading to declined applications or limited services.
The challenge is compounded by the use of automated systems by many financial and service providers. These systems rely on keyword recognition to assess risk, and terms like cannabis, hemp, and CBD often trigger immediate rejections. Even for businesses that can demonstrate compliance with UK laws, the mere presence of these terms in their name can result in unnecessary scrutiny and delayed access to crucial services.
Reputation also plays a significant role. Service providers are protective of their public image and wary of being associated with industries that could tarnish their credibility. Cannabis businesses, particularly those with overtly suggestive names, may find themselves excluded from partnerships due to the lingering negative perception of the industry. This stigma not only affects access to banking and insurance but also limits opportunities for growth and collaboration.
Furthermore, businesses with cannabis-related names face challenges beyond banking and insurance. Advertising restrictions on major platforms such as Google and Facebook often prevent them from running paid campaigns, severely hampering their ability to reach customers and build brand awareness. This adds another layer of difficulty in establishing credibility, particularly with service providers who may already have reservations.
To overcome these hurdles, many cannabis businesses are opting for neutral, non-specific names that avoid direct references to cannabis. By focusing on branding that highlights sustainability, innovation, or wellness, businesses can mitigate the risks associated with their name while appealing to a broader audience. This strategy not only improves access to financial and business services but also helps to position the company as a legitimate and professional entity in a fast-evolving industry.
Ultimately, in the cannabis sector, what’s in a name can mean the difference between thriving and struggling. For young businesses, careful consideration of their name is an essential step in navigating the complex landscape of financial services and building a foundation for long-term success.
Published: 11th February 2025
