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June 18, 2019updated 17 Sep 2021 4:41pm

An explainer: what is business banking ?

By Asena Degirmenci

Business Banking: Bank loans and financing are critical for businesses planning to invest and expand, they are equally important when times are tough and businesses want to consolidate, are short on working capital and seek forbearance.

This type of banking is a key profit generator for most banks, with both business banking (for SMEs) and investment banking (for larger corporations) being offered by most banks.

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

What is business banking?

Definition: Custom-tailored services that financial institutions offer covering financing, cash management and other banking services.

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

The various services offered include cash management, credit management, loan management, growth management and corporate finance.

How does it work?

Typically, institutions customise their products and services for companies instead of individuals.

A bank typically earns most of its profits from its business clientele due to the sums of money involved from its 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 account. Business owners typically keep their business banking separate from their personal banking, since business is considered a separate legal entity.

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 trail for the IRS, and
  5. Professionalism

What’s the difference with retail banking?

Both types of banks offer various products and services.

Retail banking, also known as consumer banking, typically deals with retail customers, that is individuals 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 many of the same services offered to individuals but there are key legal, regulatory and monetary differences when it comes to dealing with partnerships, sole traders, and incorporated businesses.

An example of business services can be seen in a recent edition of Leasing Life, in which event production company Premier UK Events received a £460,000 funding package from Santander Business Banking.



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