Business Banking vs Commercial Banking | Amplify CU (2024)

The terms business banking and commercial might seem to denote the same type of financial services. However, while these terms might seem like synonyms on the surface, there are important nuances that distinguish between the two. The types of customers business banking serves—as well as the services offered—can differ greatly from those who require commercial banking accounts. Here, we’ll explain the differences between these two types of banking, as well as the services they offer and their target customers.

What is business banking?

In general, the term business banking refers to financial accounts intended for smaller businesses, e.g. companies with 100 employees or fewer. A business bank account is a way to separate your company’s finances from your personal finances so that you can more easily keep track of your business’s funds.

What Services Do Business Bank Accounts Offer?

Because smaller businesses have specific needs, business bank accounts will offer some services that differ from commercial banking accounts. Some of the most common services to look for in a business account include:

• Checking accounts. Business checking accounts are the core of any business banking account. It’s the account business owners use day to day to conduct the majority of their business transactions, such as paying vendors and suppliers, depositing customer payments, paying employees and making business purchases.
• Savings accounts. A business savings account can help business owners set aside money for various future goals or expenses, such tax payments.
• Business credit cards. Some financial institutions may also offer business credit cards with competitive interest rates and relatively lucrative rewards programs that can help small businesses save money.
• Business debit cards. Many business bank accounts provide debit cards for owners and employees.
• Online banking capabilities. Most business bank accounts offer the option to access your accounts online, as well as with a mobile app.
• Overdraft coverage. With overdraft protection, a financial institution can draw funds from a linked business account with the same financial institution when an account is overdrawn, allowing business to continue as usual.
• Deposit insurance. Most financial institutions that offer business accounts include deposit insurance. They are likely members of the Federal Deposit Insurance Corporation (FDIC), or the National Credit Union Share Insurance Fund, and as a result, deposits up to $250,000 are insured against any loss if the financial institution should fail.
• Merchant services. This is a service that can help small to medium size business owners more easily process credit card payments from customers.
• Treasury management services. Some smaller financial institutions will offer a scaled-down version of treasury management services. These are designed to help manage a corporation’s cash flow and liquidity, coordinate secure access to a company’s accounts for multiple users, and often include fraud monitoring services.
• Employee services. These services will typically be scaled down in smaller institutions. These services can include support to organize and manage employee payments and benefits, direct deposit and payroll processing, employee stock ownership plans, retirement savings plans, and disability insurance options.
• Lending services. Not every institution that offers business banking will also offer commercial lending. Commercial lending services often include financing for business expansion or for commercial real estate purchases.

Who Offers Business Banking Accounts?

Business banking accounts are widely available with retail banks, as well as credit unions. There are also many online banks that provide business banking services. With a variety of options to choose from, small to medium-sized businesses can be more discerning when shopping around for a bank account, choosing one that offers all the services they need at the moment, as well as resources that will help them grow in the future.

What is commercial banking?

In contrast to business banking, commercial banking caters to a much different end customer. Companies who seek out a commercial banking account are usually medium to large organizations—think business with tens to hundreds of thousands of employees. Due to an exponential difference in size, these companies require services that many small businesses do not need.

What services do commercial banking accounts offer?

The needs of commercial banking clients can vary drastically from smaller businesses, and often include services related to managing cash flow and capital management.

• Global trade services. Large corporations often do business internationally. Commercial bank accounts will often provide foreign exchange services, as well as letters of credit and global payments to help reduce the risk of payment and supply risks that may occur when funds cross international borders.
• Treasury management services. Intended for large businesses, treasury management services help manage a corporation’s cash flow and liquidity, coordinate secure access to a company’s accounts for multiple users, and often include fraud monitoring services.
• Employee services. Companies with thousands of employees often need institutional support to organize and manage employee payments and benefits. Commercial bank accounts will often provide direct deposit and payroll processing, employee stock ownership plans, retirement savings plans, as well as disability insurance options.
• Merchant services. While similar to the merchant services offered for business bank accounts, the difference is one of scale. Merchant services for commercial bank accounts provide lines of credit, mobile payment solutions and electronic check services so that large businesses can make and accept payments online.
• Lending services. Loans and lending services for commercial bank accounts are similar to those of business bank accounts, but on a larger scale. Commercial bank lending services often include financing to purchase commercial real estate and industry-specific equipment.

Who Offers Commercial Banking Accounts?

Commercial bank accounts are not as widely available as business bank accounts and are offered primarily by large-scale investment banks. Unlike a business bank account, which can serve the general population, ranging from small businesses and individuals, commercial banking accounts are reserved for large businesses and corporations.

What’s the difference between business and commercial banking?

Many of the services offered by business bank accounts may also be offered by commercial bank accounts. For instance, both provide cash deposit accounts for their customers, as well as credit and debit cards, loans, and online or mobile banking options. However, the intended clients for each type of bank account vary drastically.

Business bank accounts are available at most retail banks and credit unions, and are targeted toward individuals and small businesses, while commercial bank accounts are usually only offered by investment banks and aim to serve large businesses and corporations. As a result, the services offered at business banks are customer oriented. In contrast, commercial banks aim to meet business-related financial needs, such as the facilitation of international trade and organization and administration of employee services.