Business and Commercial Banking Differences and What it Means for Your Business

The commercial banking term is mostly used synonymously with business banking in many parts of the world. A business bank account lets individuals separate their business finances from personal accounts, making it easier to track business funds.

Well-known banks have traditionally provided business banking. In recent years, there’s been a revolution in banking as online banks, otherwise known as challenger banks, also started providing stronger competition in the business banking sector.

These days, businesses have much more choice, as online banks are starting to offer accounts with online tools that allow businesses to keep track of things like expenses and tax bills.

Typical business bank account features

A typical bank will feature deposits and withdrawals, standing orders and direct debits, bank transfers, overdraft facility, and access to debit and credit cards. Moreover, most banks now also offer online and app banking, telephone banking, and accounting tools.

Main differences between business banking and commercial banking

Business and commercial banking essentially offer the same service and features. However, consumers can easily get confused because of the different names. The term business banking typically refers to small and medium enterprises (SMEs); or companies with only a small number of staff and modest levels of turnover and income.

Commercial banking is often attributed to enterprises on a larger scale. Medium-sized organizations feature complex banking needs and tend to utilize commercial banking accounts, which can handle complicated supply chains and overseas operations.

We can describe a commercial bank as a banking organization designed specifically for large and medium businesses - the term can also refer to a bank’s branch that’s dedicated to commercial clients only.

Corporate banking is a term you may also see when considering business bank accounts. Corporate banking clients are usually organizations with multiple entities and concerns about working capital management and connected cash flow.

Choosing between a business bank account and a commercial bank account

You need to base this on the size of your company and other crucial factors.

A key step to take as you look for business bank accounts is to compare options. Decide which account offers you the right features and tools, including interest. You might be interested in opening an account with a high interest rate as a full-pledged saving account to accrue the highest interest levels possible.

You’ll also need to consider the account fee, but compare this with the free account duration available first, as some accounts may attempt to entice with their long free account durations. However, these accounts may start charging basic actions like transferring money. Check if the provider has an overdraft facility available. If you are a small business or a sole trader, it’s worth exploring if overdraft interest is lower for the business account and if you will be eligible for a business bank account.

A business bank account is generally the right choice for a small business, while a commercial bank account can be better for medium to large businesses.

You can find more resources online or visit bank sites to learn more about how commercial banking works, if it’s the right direction for your business, and what other benefits you can take advantage of.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes