The smaller, local or family owned businesses and companies deal with commercial banks and the larger, nationally recognized conglomerates use corporate banks. There are many benefits to comparing corporate and commercial banking.
Commercial banking is usually for local businesses that are considered small businesses or companies that do not require large sums of cash or will be making large loan payments or deposits.
A bank that handles personal financial needs for individuals and families will not be able to accommodate the complex analytical regulations or detailed tools of the trade a corporate banker will use to help a larger corporation with their financial requirements.
From a corporation’s standpoint, there are certain risks they must take in order to be successful. A risk management or assessment is what a corporate banking center’s function is and they could help a corporation minimize their risks from a financial perspective.
A company or business will typically receive money, also known as interest payments, on the money they deposit into a commercial bank. These are often called time or term deposits because when a business or company places a large amount of money into a commercial bank, they will often time not be able to take the money out for a term or a period of time. While the money is in the care of the commercial bank, it will earn the company money because the bank lends it out to others.
There are a number of things a commercial banking institution could do to help a small business with such financial needs as issuing bank drafts or checks; receiving term deposits; providing safe deposit boxes for the secure storage of confidential documents and other important papers; distribution, brokerage and sale of various insurance needs; treasury services; merchant banking; cash management and unit trusts.
A corporate banking center or banker will help a corporation with their working capital which includes things like setting up and maintaining several different short-term accounts such as insurance quotes or investments of smaller amounts that are only tagged for a short period of time. A corporate bank will help a corporation with their capital investments which are the long-term needs of a corporation and they hold things like the capital structures and fixed assets.
Corporate banks offer corporate bonds to qualified corporations; these are like loans but not exactly. A bond is issued by a corporation in order to raise money for something the corporation needs or wants such as a new building, relocation or a new product line. The bond from a corporation is considered a long-term financial situation with the maturity date more than a year after the beginning date or issuing date of the bond.
Small businesses that use commercial banks do not necessarily have the opportunity to issue or purchase bonds to raise money for what they need and therefore they rely on loans, usually unsecured loans. Unsecured loans are those loans which do not have any collateral attached to them such as a car or house. If a business is unstable or needing cash to pay creditors and not for stock or to purchase materials, then a commercial bank may require the company to put up their building or vehicles as collateral on the loan.
There are several differences in corporate and commercial banking and not only in the volume of business and money they deal with, but in the size of the financial institutions themselves.
Global Financial institution offering commercial and personal Barbados bank services including online banking, credit card, loans, Trinidad and Tobago money management and more.