# Business Banking: Definition, Key Services, and How It Works

![Business Banking](https://www.investopedia.com/thmb/oicEhGcKuz6c-yh-tukB4JODWiE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/final_businessbanking_definition_recirc_1028-blue-6f6b9cab4cd94d1995b3afd5b9caac39.jpg)

*— Investopedia / Sydney Saporito*

> **Definition**
>
> Business banking refers to the financial services provided by banks specifically tailored for businesses, including loans, credit, and deposit accounts.

## What Is Business Banking?

Business banking provides companies with financial services, offering products like loans, credit, savings, and checking accounts. Unlike [retail banks](https://www.investopedia.com/terms/r/retailbanking.asp), business banks may also provide commercial loans, asset management, and advisory services for small to large businesses. They help companies manage cash efficiently, protect against fraud, and offer flexible services to meet the needs of different industries.

### Key Takeaways

*   Business banking services include loans, credit, savings accounts, and checking accounts tailored for companies.  
    
*   Businesses utilize bank financing for expansion, acquisitions, and managing operating expenses.  
    
*   Cash management services help companies efficiently handle receivables, payables, and liquidity.  
    
*   Payroll services are available from banks for small businesses lacking resources for a bookkeeper.  
    
*   Fraud protection services safeguard business accounts from unauthorized transactions and employee fraud.

## The Basics of Business Banking Explained

Business banking is also called commercial or corporate banking. Banks provide financial and advisory services to small and medium businesses as well as larger corporations. Banks tailor these services to meet the unique needs of each business. These services include [deposit](https://www.investopedia.com/terms/d/deposit.asp) accounts, [night depositories](https://www.investopedia.com/terms/n/night-depository.asp), non-interest-bearing products, [real estate loans](https://www.investopedia.com/mechanics-of-real-estate-banking-8415143), commercial loans, and credit card services. Banks may also offer [asset management](https://www.investopedia.com/terms/a/assetmanagement.asp) and securities [underwriting](https://www.investopedia.com/terms/u/underwriting.asp) to their corporate and business clients. Some companies let employees deposit money into accounts using a [warm card](https://www.investopedia.com/terms/w/warm-card.asp). These cards allow only deposits and are not debit cards.

In the past, investment banks and retail/commercial banks were required to be separate entities under the [Glass-Steagall Act](https://www.investopedia.com/articles/03/071603.asp)—also known as the Banking Act of 1933. That changed in 1999 after parts of the act were repealed. Under the new rules, banks could offer business, retail, and investment banking services under one roof.

Demand for business banking is increasing in the United States, as the business sector continues to grow. The number of commercial banks has been declining since 2002, when there were 7,870 commercial banks, compared to 4,708 in 2018. This has primarily been due to [mergers and acquisitions](https://www.investopedia.com/terms/m/mergersandacquisitions.asp). Wells Fargo, JPMorgan Chase, and Bank of America hold the largest market shares in corporate banking, with JPMorgan Chase being the biggest U.S. commercial bank, earning $142 billion in 2019. It's important to note these banks also operate as investment banks and retail banks, allowing them to be diversified in both clients and products offered.

## Comprehensive Services Offered by Business Banks

Business banks provide a wide range of services to companies of all sizes. In addition to offering checking and savings accounts, business banks provide financing, [cash management](https://www.investopedia.com/terms/c/cash-management.asp) , payroll services, and fraud protection.

### Exploring Bank Financing Options for Businesses

Bank financing is a primary source of capital for business expansion, acquisitions, and equipment purchases, or simply to meet growing [operating expenses](https://www.investopedia.com/terms/o/operating_expense.asp). Depending on a company's needs, business banks can offer fixed-term loans, short- and long-term loans, lines of credit, and asset-based loans. Banks provide equipment financing, either through fixed-loans or equipment leasing. Some banks cater specifically to certain industries such as agriculture, construction, and commercial real estate.

### Effective Cash Management Strategies for Businesses

Also referred to as treasury management, cash management services help businesses achieve greater efficiency in managing their [receivables](https://www.investopedia.com/terms/a/accountsreceivable.asp), [payables](https://www.investopedia.com/terms/a/accountspayable.asp), cash on hand, or [liquidity](https://www.investopedia.com/terms/l/liquidity.asp). Business banks set up specific processes for businesses that help streamline their cash management, resulting in lower costs and more cash on hand.

Banks provide businesses with access to [Automated Clearing House](https://www.investopedia.com/terms/a/ach.asp) (ACH) and electronic payment processing systems to accelerate money transfers. They also allow for the automatic movement of money from idle checking accounts into interest-bearing savings accounts, so the cash surplus is put to work while the business checking account has just enough for the day’s payments. Businesses have access to a customized online platform that links their cash management processes to their checking and savings accounts for a real-time view of their cash in action.

### Payroll Services: Optimizing Business Operations

Many banks offer payroll services for small businesses. If your business is new or too small to incur the expense of a bookkeeper, many banks provide software or specific services specifically geared towards payroll management. Aside from banks, there are many independent payroll service providers. It's worth comparing the costs and benefits of the two.

### Safeguarding Your Business with Fraud Protection

[Fraud](https://www.investopedia.com/terms/f/fraud.asp) insurance is offered by banks to protect businesses from any sort of fraud that has occurred in their checking accounts. These can include problematic checks from customers or employee fraud that can result from too many people having access to accounts, making transactions difficult to trace.

## The Bottom Line

Business banking is different from retail and investment banking because it's meant for business and corporate clients. It offers checking and savings accounts, loans, credit, cash management, payroll, and fraud protection. Business banking is growing in the U.S., and mergers have affected the number of commercial banks available. Large banks like JPMorgan Chase, Wells Fargo, and Bank of America often provide both business and investment banking services.