What Is the Function of a Commercial Bank?

Small and medium-sized businesses use commercial banks primarily for business loans. High wealth business customers of commercial banks may receive some personal services from their bank such as savings and checking accounts, money market accounts and retirement planning. Account representatives, or salespeople, visit clients in their places of business instead of providing walk-in locations.

Risk

Commercial banks typically are more liquid than other financial institutions because they do not make high-risk investments, focusing more on loans and commercial investments.

Private

Most commercial banks are privately owned and funded by investors.

Insured

The Federal Deposit Insurance Corporation (FDIC) insures deposits at commercial banks at the same rate as publicly held banks.

Services

Merchant services, such as credit card processing and customer financing, are offered to clients of commercial banks.

Markets

Often commercial banks are created to serve a niche market such as construction companies, private physician practices or attorneys.

Government

The Small Business Administration (SBA) often uses commercial banks to process and service their small business loan programs.

Resources

• Small Business Administration