Commercial banks provide a range of services to businesses of all sizes. Some of the services provided by commercial banks mirror those provided by retail banking establishments. Within companies there is a need, albeit on a larger scale, for standard banking features such as checking and savings. Loan benefits are also provided in a similar manner to the benefits afforded consumers of retail banks. Commercial banks are specifically beneficial to the scope and scale of business clients and their banking needs in the following ares:
1. Deposit Accounts
Commercial banks provide checking and savings accounts for companies and their employees. Commercial banks are responsible for issuing and honoring checks as well as keeping track of funds being credited to, and debited from, the account.
Savings accounts are deposit accounts that are designed to withstand fewer transactions. In fact there are Federal laws that regulate the number of transactions that can take place for each and every savings account within a federally insured financial institution. This ensures that banks always have a certain level of liquidity in the event that a large portion of their assets are required by account holders.
Money market accounts are savings accounts that generally yield a higher interest rate. These accounts are regulated by the Federal government in the same manner, and are only unlike savings accounts in that banks will often require that a certain balance is maintained to enjoy the higher interest rate.
Commercial banks complete monetary transfers at the request of their account-holders. Transfers are done electronically and telegraphically to overseas institutions.
Banks of all types rely on the revenue gained by interest payments from loans. There are two types of loans, and within those two types are several different subtypes.
An unsecured loan is a loan that will be given by a bank without collateral. The other form of loan is a secured loan and requires some form of collateral. Commercial banks provide loans to businesses for expansion or acquisitions, or for other reasons. Commercial banks also provide another form of loan in the form of overdraft protection.
Corporate bonds are much like unsecured loans. Commercial banks will often buy corporate bonds from their customers or perspective customers. This practice has many advantageous results for the bank. First, the corporate bonds are bought at a price and purchased back by the businesses for a sum greater than the original purchasing price; this is because of interest. Secondly, the bank uses the relationship via corporate bonds to lure more businesses, or to gain a greater share of the company's banking needs.
Commercial banks will also purchase government bonds from time to time.