Business Banking

Business Banking

What is corporate banking?

Business banking is a business’ financial relationship with an institution that provides business loans, credit, savings, and chequing accounts specifically designed for businesses rather than individuals.

Business banking occurs when a bank or a division of a bank only deals with businesses. A bank that deals mainly with individuals is generally called a retail bank, while a bank that deals with capital markets is known as an investment bank. Some banks also deal with all three types of customers.

Key points to remember

  • Corporate banking is a range of services provided by a bank to a business or corporation.
  • Business banking services include loans, credit, savings accounts and chequing accounts, all of which are specially designed for the business.
  • Banks can offer banking services to businesses, individuals and investment banks under one roof.

Understanding business banking

Commercial banking can also be called commercial or corporate banking. Banks provide financial and advisory services to small and medium-sized businesses as well as large corporations. These services are tailored to the specific needs of each business. These services include deposit accounts and interest-free products, home loans, business loans and credit card services.

In the past, investment banks and retail / commercial banks had to be separate entities under the Glass-Steagall Act – also known as the Banking Act of 1933. This changed in 1999 after the repeal. parts of the law. Under the new rules, banks could offer banking services to businesses, individuals and investment banks under one roof.

Demand for corporate banking is increasing in the United States as the corporate sector continues to grow. The annual growth rate is expected to grow by 7.3%, with revenues reaching up to $ 762 billion in 2019, according to research firm IBISWorld. His January 2019 report indicates that the companies with the largest share of the corporate or corporate banking market are Wells Fargo, JPMorgan Chase. and Bank of America.

Services offered by merchant banks

Merchant banks offer a wide range of services to businesses of all sizes. In addition to chequing and savings accounts, commercial banks offer financing options and cash management solutions.

Bank financing

Bank financing is a primary source of capital for business expansion, equipment acquisitions and purchases, or simply to meet increasing operating expenses. Depending on the needs of a business, commercial banks may offer fixed term loans, short and long term loans, lines of credit and asset loans. Banks provide equipment financing, either through fixed loans or equipment leasing. Some banks specifically target certain industries such as agriculture, construction and commercial real estate.

Finance management

Also called cash management, cash management services help businesses become more efficient in managing their receivables, debts, cash or liquidity. Commercial banks have put in place specific processes for businesses that help streamline their cash management, which results in lower costs and more available funds.

Banks offer businesses access to the automated clearing house (ACH) and electronic payment processing systems to speed up money transfers. They also allow automatic movement of money from inactive chequing accounts to interest-bearing savings accounts, so that excess cash is taken advantage of while the business chequing account has just enough for payments of the day.

Businesses have access to a personalized online platform that links their cash management processes to their checking and savings accounts for a real-time view of their cash in action.

Important: many banks also offer asset management services and underwriters to their corporate and commercial clients.

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