Corporate Banking

24 May 2015

Corporate banking is providing banking and financial services to business clients and non-commercial organizations (for example, charities, educational organizations, public institutions, and government agencies). The services offered by a bank to commercial organizations can vary depending on the organization turnover, industry sector and georgaphical focus of the organization.

Corporate banking covers a variety of business needs with a full range of financial solutions:

Corporate banks also offer its customers risk management solutions as well as research and advising.

Payments and Cash Management

Payments and cash management services are used by companies for managing their working capital, performing their everyday banking and payment activities. These services give the companies greater control over their cash and collections, and help them to manage their liquidity efficiently, as well as enable customers to make seamless payments between countries and currencies.

Current accounts can be offered in a variety of currencies with or without an overdraft option.

Card services include a range of card products to facilitate administering corporate expenses (for example, travel and entertainment expenses, corporate purchases). The card products include debit cards and credit cards with and without spending limits. The card services provide control over card allocation and expenditure limits.

Payment solutions cover business needs to make and receive payments quickly and efficiently. Banks provide various payment solutions:

Foreign exchange solutions are offered to identify and manage a company's currency exposures. A company can be exposed to foreign exchange risk either directly through import/export activity, or indirectly via suppliers. The solutions include FX derivatives, FX spot and forward contracts.

Financing Solutions

Credit and Lending

Corporate credit and lending is typically the biggest area of business within corporate banking, and one of the biggest sources of profit and risk for a bank. Corporate credit and lending products cover a wide range of business needs from dealing with unexpected expenses and unforeseen events to financing long-term business goals.

Business overdraft means finding extra short-term funds at a short notice. Hence, a business overdraft helps businesses dealing with unforseen events and unexpected expenses. This type of overdraft ensures that a business customer has funds in place and available immediately should the unexpected happen.

Commercial mortgages helps businesses cover their real estate needs like buying property, extending, renovating or developing own business premises, moving to a bigger office or expanding to multiple locations. Residential buy-to-let mortgages can suit businesses which would like to grow capital and rental income.

Business loans suit various business short or long-term financial goals. Business loans can be both secured and unsecured, can also vary in terms and amounts, as well as in interest rates (for example, fixed or market-linked), repayment schedules and early repayment penalties.

Asset-based lending is any kind of lending secured by a company's asset. Mortgage loan is an example of asset-based lending. Asset-based loans are usually tied to inventory, accounts receivable, machinery and equipment.

Revolving credit allows a company to access funding at any time over the duration of the credit at the value the company requires, up to an agreed limit. The funds can be access via a series of short-term loans. Total interest charges depend on the amount of funding used.

Syndicated loans are offered by a group of banks (called a syndicate) who work together to provide funds for a single borrower.

Trade Finance

Trade finance provides services and financing for buyers and suppliers throughout the trade cycle, enabling them to optimise, secure and finance their international trade operations throughout the world.

Documentary credit (also called a letter of credit), is a payment instrument and a payment guarantee at the same time. This type of solution can fit the needs of both importers and exporters. Documentary credit is an irrevocable commitment of the buyer’s bank (the issuing bank) in favour of a supplier/exporter (the beneficiary) to pay to the supplier, provided that the supplier submits complying documents.

Documentary collection is a flexible solution to secure and mitigate risks between trade partners who experience a long-term stable business relationship. Documentary collection is a process in which the exporter instructs its bank to forward documents, related to the export of goods, to the importer’s bank with a request to present these documents to the importer for payment, indicating when and on what conditions these documents can be released to the importer.

Bank guarantee is a security given by the bank to protect the beneficiary against the applicant’s default. The bank only commits to pay, in whole or in part, in one or in several drawings, the amount stated in the guarantee. This means that the bank will not, and is not liable to deliver the goods or to assume responsibility for carrying out a project.

Receivable and Payable Finance

Receivable and payable finance (or supply chain management solutions) complete the range of trade finance services, enabling companies to optimise their working capital management through receivables purchase and payables financing solutions.

Factoring is short-term corporate financing solution, giving companies rapid access to liquidity. A company sells with a discount its receivables from deliveries of goods or services to a bank.

Factoring can be performed in a silent or open way:

Invoice factoring gives the company access to cash more quickly than if they had to wait until the invoice had been cleared. Using invoice factoring, a company can get up to 90% of the value of invoices the next working day.

Invoice discounting is similar to invoice factoring: it allows a company to get money against its sales invoices before the customer has actually paid. However, with invoice discounting the invoices are not actually sold to the bank, rather the bank provides a short-term borrowing using the unpaid sales invoices as collateral for the borrowing.

Reverse factoring enables the buyer to extend their payment terms without causing additional cash flow problems for the seller, minimising risk across the supply chain in the process.

Forfaiting is a factoring used in international trade finance by exporters who wish to sell their receivables to a forfaiter. The forfaiter takes on all the risks associated with the receivables but earns a margin.

Project Finance

Project finance is the medium- to long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project. Project finance is predominantly used in oil and gas sectors, petrochemicals, mining, power, transportation and telecommunications.

A typical project financing structure involves one or more sponsors (equity investors in the project company) and a debt package provided to the project company by a syndicate of banks. The debt is secured by the project assets and repaid from project cash flow with only limited recourse to the project sponsors.

Leasing Solutions

Lease is in agreement, outlining the terms under which one party agrees to rent property from another party.

Lease finance product range includes:

These products are applicable for assets such as construction equipment, agricultural machinery, commercial vehicles, office, IT and telecoms equipment, for which companies have specific needs that often go beyond pure financing.

Surplus Funds Managing

Corporate deposits can be used by a company as an investment option when the company has a surplus of its corporate money. There is a variety of corporate deposit products available characterised by different terms, interest rates, methods of interest payment. Corporate deposit accounts can be opened in different currencies.

With instant access accounts a company can access its funds whenever needed. An additional bonus can be paid for each calendar month in which the company does not make a withdrawal.

Notice accounts offer higher interest rates than instant access accounts, providing the required notice period when the deposit holder need to make a withdrawal.

With fixed term deposits the interest rate is fixed at the time of openning the account.

Partial withdrawal fixed term deposit combines the features of a fixed term deposit and a notice acoount: while the term of the deposit if fixed, the customer can access certain amount of the deposited funds giving a prior notice to the bank.

Structured deposits are usually fixed-term deposits where the return is determined by linking the performance of the investment to movements in an underlying market, such as foreign exchange, interest rate, equity and/or commodity markets.

Market-linked deposits is an example of structured deposits with returns tied to an underlying asset. Market-linked deposits are not equivalent to investing directly in the underlying asset: market-linked deposits may have features such as a maximum return cap or averaging, which could result in the performance of the deposit differing from a direct investment in the underlying asset. Furthermore, the return generated by a market-linked deposit, often may not be paid until maturity.

Client accounts are designated for businesses which are entrusted with third party deposits, for example solicitors, property managers, stockbrokers, pension administrators.

Debt and Equity Management Solutions

Equity management solution provided to the companies can include:

Debt management solutions include: