Definition: What Is Commercial Banking?


In general, commercial banking is defined as the products and services offered to businesses and corporations as opposed to banking services provided to individuals.  

Many of the large banks in the country offer both individual and commercial banking services, but there are often many specialty services not offered to, and not needed by, individuals that are available to businesses. 

Some of the commercial banking services offered by banks might be similar to those that individuals are familiar with, such as making deposits or applying for loans. 

However, the loans involved in business banking have much different qualification criteria than those applied for by individuals and often represent much larger amounts. 



Instead of just having to qualify your income to the bank to qualify for a loan, a business can apply using many different, and sometimes complex, financial criteria. For instance, a business could use contracts for future production to obtain the funds they need to meet the production required by those contracts.  

Commercial banking also involves some specific services that are totally unique to the corporate sector. 

 

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For instance, when a company goes public, it needs the services of a commercial banking company to underwrite the IPO. 

Commercial banking is often a much more hands-on service as well. Companies and corporations are a massive source of income for banks. 

As a result, banks tend to hire account managers that specialize in commercial banking to provide personalized service to their commercial clients. 



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