Banks play an important role to businesses who plan to invest and expand.

Business banking is a key profit centre for most banks, with both business banking and investment banking being offered within the same sphere by most banks.

Small businesses heavily rely on business banks for a variety of services that help establish and make it easier for businesses to grow.

What is business banking?

Definition: Business banking refers to custom-tailored services for corporations that financial institutions offer for financing, cash management and other banking services.

Business banking is also known as corporate banking, which refers to banking that deals with corporate customers. It is the also known as initiating the service of customer loans.

This banking deals with a variety of businesses ranging from small start-up companies to multinational corporations with large financial stakes.

The various services that business or corporate banking offer include cash management, credit management, loan management, growth management and corporate finance.

How does it work?

As mentioned above, business banking refers to company’s dealing with its finances at an institution that offers services such as loans, credit, checking accounts and savings. These institutions are specifically designed for companies instead of individuals.

A bank typically earns most of its profits from its business banking clientele due to the large sums of money from corporate loans, as well as the amount of interest charged from these loans.

Additionally, loan bonuses can also increase a corporate banking salary even more. 

Why is it important?

One of the first things new business owners do when they start their business is to open a business bank account.

It is important to keep your business banking separate from your personal banking, since business is considered a separate legal entity.

By keeping money physically separate in different bank accounts, it is easier to track which purchases were from your business account and your personal account.

To help manage finances more efficiently, some business owners even use different banks to separate their business from their personal accounts.

To summarize, why is business banking important?

  1. Clean and accurate bookkeeping
  2. To prove your business is not a hobby
  3. Separate business account required for incorporated businesses
  4. A clear audit train for the IRS, and
  5. Professionalism

What’s the difference between retail banking and business banking?

Both types of banks offer various products and services.

Retail banking, also known as consumer banking, typically deals with retail customers or those who do personal banking. Services offered include debit and credit cards, savings and transactional accounts, mortgages, personal loans and more.

In business banking, banks offer more or less the same services, but to a larger extent. Services include cash management, customising loans, asset management, treasury services and more.

An example of business banking services can be seen in last week’s issue of Leasing Life, in which event production company Premier UK Events received a £460,000 funding package from Santander Business Banking.