Financial institution activities and offerings that support the financial needs of businesses
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Business banking involves activities and offerings that financial institutions engage in to solve the financial challenges of businesses. The specialized suite of financial products and services is designed for companies to compete effectively and for financial institutions to grow their share of wallets.
Business banking relies primarily on the business, although support by owners is considered a secondary factor.
Business banking and commercial banking are terms sometimes used interchangeably, but institutions may define them as segments of increasing client size and complexity. Institutions’ reliance on the business entities compared to the owners varies by business size and complexity.
For large public and private enterprises with more complex needs, business banking is no longer sufficient, and corporate banking and investment banking advisors may be required.
Many banking products and accounts share features with retail banking, while others have no parallel. These include deposits, credit, treasury and payments, and advisory services to conduct global commerce.
Businesses need convenient access to funds. Products and services to accept and use deposits are an essential liquidity function provided by financial institutions.
Commercial banks offer commercial loans and other credit products whenever a business requires funds beyond the capital it has available on its balance sheet. This credit creation function may finance a borrower’s working capital funding gap, or it may finance capital expenditure (CAPEX).
Many treasury and payment service offerings enhance business clients’ operational effectiveness and efficiency.
Institutions may also offer advisory services to businesses that engage in international trade via their global commerce divisions.
Several forms of deposit acceptance are common and depend on the liquidity of the account. Liquidity varies from immediate (on-demand) to indeterminate and fixed-terms.
Much like deposits, forms of credit are purpose-driven to finance a variety of use cases. The duration of credit offerings ranges from short-term (demand) to long-term.
Beyond deposit acceptance, many money management solutions are available for businesses to address treasury and payment needs. Below are examples of fee-based products and services in this category.
For domestic and international trade, institutions also offer services to manage risks arising from these business-to-business activities.
CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:
This Introductory course covers the fundamental knowledge about the banking industry. We will discuss the various types of financial institutions and how they differ in the types or products and services provided to their own customer groups. We can look at a bank’s balance sheet and income statement and understand how a bank generates return. Finally, we will explore the common career paths in different areas of banking.
Upon completing this course, you will be able to:
This Introduction to Banking course is perfect for any aspiring credit analysts working in insurance, underwriting, rating agencies, commercial lending, corporate credit analysis, and other areas of credit evaluation. It is also a great introductory course for anyone who would like to learn more about the banking industry.
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