Commercial Banks

Commercial banking designs products that specially focus on profitable businesses. Products like loans, services for merchants, global trade services, basic financial products like saving accounts for both business and individuals, payment processing, certificates of deposit and many more come from commercial banking. Commercial banks make money from all these products in terms of interest, service charges and other charges. If you compare retail banks and commercial banks, commercial banks have a larger customer base. Retail banks are only designed for individual account holders and a small chunk of small businesses. Commercial banks serve big loans, deposit accounts and lines of credit. If you look into retail banks, you will get to know that they are branches of commercial banks.

Commercial banks consist of two arms to support businesses. Its corporate banking arm helps small businesses and the investment banking arm help large enterprises. These banks are registered in the stock market so these arms help them to make profits for their stockholders. Many customers willingly hold their deposits in the bank. These deposits are used by the bank to give loans to the people who need loans. Commercial banks take deposits from the customers in different accounts and distribute those deposits to different businesses in terms of loans and the interest they earn from those loans benefited both depositors and stockholders.

Online Banking makes banking convenient and fast. Commercial bank online banking allows you to access your loan account, deposit, and transfer funds. With Commercial bank online banking, you can pay your bill from anywhere through the computer.

How Commercial Banks work?

Commercial banks not only provide loans to different businesses but also have a diverse range of services.

Loans

A business could have many needs. They may require a large amount of money for big machines, real estate, vehicles for different operations and other big purchases. To fulfil all these needs businesses need additional funds. Commercial banks give loans to fulfil their additional needs.

Deposit Accounts

Both individuals and businesses need two different kinds of accounts. Individuals need savings accounts, where they save cash. Those cash reserves are used by banks to provide loans and earn money. Businesses need checking accounts that help them to make payments to their employees and suppliers.

Line of Credit

When businesses required short-term funds for their recent needs. Commercial banks provide funds in this facility. It is like a credit card for small businesses. For example, if a company needs to pay its employees and they get payments for its recent shipment, they use a Line of credit.

Letters of Credit

Many businesses do business overseas. While doing business overseas with different laws, it is quite risky and difficult to affirm if the customer is trustworthy. Letter of Credit document of a company affirms the payment and serviceability of that company. It increases the probability of successful business transactions. 

Lockbox Services

If a firm is required to efficiently transfer funds in large volumes then lockbox services provided by commercial banks can help. Banks set up post office boxes in nearby locations, accept the payment and transfer it to business accounts. This way a firm can move funds more quickly.

Payment and Transaction Processing

As We know, individuals and business houses accept payment in different forms. It can be through credit cards, paper checks and electronic checks. Banks help in all these services and manage the risks of fraud and charge for that.

Foreign Exchange

Any business firm which does business outside its country, accept and spend money. Usually, different countries have their own currency and business firms need to exchange that money accordingly. Commercial banks help firms to convert the money and they even minimise the risk.

Investment Banking

Investment banking is an arm of commercial banks to provide major financial help to businesses. If a business starts, sells a large debt or raise fund through different methods, commercial banks help in those processes.

Benefits of a Commercial Bank Account

If you have any small or even home-based business, you should consider opening a business account. It will give you several advantages:

It separates your business and personal finances

If you have a separate account for your business and personal use, it makes your bookkeeping easy. You don’t need to do manual work. In your legal affairs, while you file your tax return, it will be easy to understand which transaction belongs to your business and which belongs to your personal uses. This way you can save time and manpower.

It lends credibility to your company 

It gives more credibility to your business if you have a separate business account. Your customers and clients will be more comfortable and confident while transferring payment to your business account rather than your personal account for products and services they will take.

It helps your firm foot the bill for large expenses

When your firm needs an urgent amount to pay its expense. Commercial banks provide this service in the forms of loans, line of credit, credit cards etc. It helps you fulfil your urgent need and return it when you get paid for your recent delivery.

It can help build business credit

Opening a line of credit, for example, will help you in building a credit profile that will help you in getting a loan from a commercial bank in future.

Multi Factor authentication

It is a layering of authentication measures that make commercial bank online banking as secure as possible.

Conclusion

Apart from the benefits that retail banks provide, commercial banks provide additional benefits to its customers. Businesses either small or big should open commercial bank accounts, it will provide extra services to businesses and help them grow in less time.