5 Key Differences: Commercial Bank vs. Investment Bank

Are you looking into what type of bank will be perfect for you? Deciding between a commercial bank vs. investment bank can be a complicated question. 

Luckily, we’re here to help. Keep reading, and we will discuss the five key differences between commercial banks and investment banks. 

1) Services

First, its important to consider the services the two provide. They offer different things. 

If you’re looking to underwrite new debt and equity securities, selling securities, pilot mergers and acquisitions, reorganizations, and or broker trades, then an investment bank is for you

On the other hand, if you’re in the market for individual loans, small business loans, checking and savings accounts, and or certificates of deposit, then you’re looking for a commercial bank. Most people are probably most familiar with commercial banking for their checking and savings accounts. 

Have you figured out precisely what services you are looking for? Large scale or small scale? 

Great, now that we’ve got that covered, let’s look at what kind of expenses and fees we are looking at. 

2) Expenses and Fees

While the dollar amount isn’t a distinguishing factor, it does show some differences. The fees are how the banks make their income. 

Investment banks typically deal with more significant dollar amounts due to having bigger corporations as clientele and higher monetary amounts in investments. Commercial banks handle basic financial transactions, which can get higher in monetary amounts, but usually equally a lesser amount of money. 

Investment banking comes with a set of fees due to the level of risk involved. The fees differ from firm to firm, but some of the potential fees could include:

  • Retainer fees
  • Upfront fees
  • Expense reimbursement
  • Success fees 
  • Minimum fees
  • Engagement fees

So what does this all cost? A monthly retainer typically doesn’t go lower than $5,000 a month. The retainer is what secures the investment bank and covers their cost as well as the risk they are taking on. 

Commercial banks also have their own sets of fees. They typically range much lower than that, though. 

Commercial bank fees vary based on account fees, safe-deposit box fees, and late fees. Some examples of potential account fees could be:

  • Monthly maintenance charges
  • Minimum balance fees
  • Overdraft fees
  • Non-sufficient funds charges

You’ll also run into more fees when it comes to loans, but it depends on the different kinds you’re considering. 

Now that we’ve got that covered, who exactly uses which type of bank?

3) Types of Clientele

Are you looking at banking options for an institution or for yourself? 

Well, big investment banking clientele can vary depending on the scope of need or based on the client. Some examples of big investment banking clientele are:

  • Corporations
  • Pension funds
  • Other financial institutions
  • Governments
  • Hedge funds

Large investment banks can also serve as financial advisors or brokers for institutions or companies. 

An investment bank could also offer retail operations for smaller individual clients.

If you’re reading that and saying, “Nope, not me!” Then you could line up with the commercial bank clientele more so than the investment bank.

The clientele of commercial banks primarily comes from individuals using personal checking and savings accounts, or through personal loans. Basically, ordinary people who are looking for standard bank needs. 

Through loans and earning interest income from investments, commercial banks make their money to provide new business loans. 

You now know what services are offered, how much it could cost, and if you fit their clientele. Did you consider the regulations that come with commercial banking and investment banking?

Don’t worry. We’re covering that next. 

4) Regulations 

All banks have some set of regulations to follow

Government authorities like the Federal Reserve and the Federal Deposit Insurance Corporation regulate commercial banks.

Commercial banks are insured so they can maintain customer account protection. For example, some can cover up to $250,000 deposits. 

Investment banks aren’t regulated nearly as much as commercial banks. The Securities and Exchange Commission governs them. This means their clients have less protection, but and gives the bank more operational independence. 

Because of the regulation difference, investment banks have higher risks associated with them. When you use an investment bank, you assume the risk, whereas commercial banks work in the interest of their clients. 

5) Banking Examples

You may be thinking great, now I know some difference, but can you help me out with some examples?

You got it! 

Have you heard of JPMorgan Chase, Goldman Sachs, Morgan Stanley, Credit Suisse, or Deutsche Bank? These are examples of large investment banks. 

Commercial banks in the United Kingdom could include HSBC, Royal Bank of Scotland, Lloyds TSB, Barclays, and Santander. 

Some banks could combine the functions of a commercial or investment bank. This could aid in the sales of an IPO or increased trading. 

This isn’t crucial to dive into, but worth noting. 

Some of the employees you can expect to run into in a commercial bank include tellers, sales associates, trust officers, loan officers, branch managers, and technical programmers. Whereas in investment banking, you’ll probably deal with an investment banker directly. 

So, Where Do You Go From Here?

Now when you ask the question commercial bank vs. investment bank, you have the ability to make an educated decision.  

From offering different services to helping different types of clientele, the kind of bank you choose will be a choice you make based on your unique set of needs at the time. Luckily, you have plenty of resources to turn to. 

If you’re interested in learning more about the finance and banking world head to CFI.co.

5 Huge Reasons to Trust Your Financial Advisors

1 in 10 adults in the UK are turning towards financial advisors to help manage their money and investments wisely. 

A financial advisor is a trained professional who can help you get the most out of your dollars. They help you know where to invest to get the best returns. And also how to manage your finances to meet your goals. 

Taking advantage of financial advisors can be a game-changer for many people. But often people put off asking for help and advice in this area. 

We’ve put together the top five reasons why you should work with a personal financial advisor. 

1. Training and Education in Finances 

The first reason that you should work with and listen to a financial advisor is that they likely have more knowledge about the subject than you do. 

A trusted financial advisor will often have certification beyond their college education. This certification will be earned by completing various educational requirements and then passing an exam covering the things they’ve learned. 

The economy, market trends, and predictions, and even the worth of a dollar are things that are continually changing.

Financial advising educational systems will give these professionals the training necessary to keep up with all the changes. Not only will they be able to keep up, but they’ll also be able to explain things to you in a way you can understand. 

And from there they can give you sounds, steady advice based on the information they’ve been given about your situation and the current economic standings. 

You can certainly take a DIY approach to managing your finances, but you may lack the knowledge and training to do it successfully. 

2. Time to Dedicate to Watching Markets

In order for investing to be successful and make you money, you have to buy the right stocks at low prices and then sell them at higher prices. This requires you to watch the market to know when things are low and high. 

Timing is everything in making money from investments. 

It takes consistent effort on a daily basis to be able to see trends throughout the market. The average person doesn’t have a lot of spare time lying around to watch for and interpret the trends they’re seeing. 

Instead, you could put your confidence in a financial advisor whose job it is to watch and understand the market trends. 

These professionals often spend a significant amount of time keeping themselves informed and in the loop of what’s going well and what’s not in investing. They’ll have a  better knowledge of things to buy and what to sell. 

You could half-heartedly make investing decisions in your spare time or you could leave those up to the professionals. 

3. Keep Complicated Situations Organized 

The traditional economy of a single income household has been changing rapidly over the last decade. Now many people rely on side hustles and secondary jobs to earn all of their income. 

While all of these sources are great for your bank account, they can make your financial situation a little more complicated. 

It can be hard to keep everything straight and have a good comprehensive view of your financial state. This requires you to keep detailed records of what’s going in, what’s going out, and any other changes to your account. 

The best financial advisor for you will be one who understands your situation. They’ll be able to keep things organized for you and give you advice on how to use your money the best way. 

They may also be able to help you make sure you meet tax or other legal requirements based on their better understanding of the laws in your area. 

4. Know How to Work Towards a Goal

Most people have some kind of financial goal they’re working towards, whether they realize it or not. It could be to save for a down payment on a house or pay off some unwanted debt. Or maybe it’s as simple as not wanting to feel stressed about their money situation. 

If you have a goal in mind to help your financial situation, it’s a great time to work with a financial advisor. 

A lot of times the outside perspective of someone unattached to your situation can make a big difference in making a solid plan. They can show you weak spots in your spending and other ways you could save. 

You can come with questions to ask a financial advisor for a professional opinion. This helps you to make the best choices for your family. 

Working with a financial advisor may also give you the motivation and determination to make better choices. Almost like a new level of accountability to keep you honest!

5. Less Worry During Life Changes

Our lives are always changing; we move, change jobs, add to our families, and acquire new assets. All of these things (and many more) change our financial situation. 

A financial advisor will be able to help you navigate through all of those major changes. 

They’ll be able to give you advice on how to adjust the way you spend, save, and invest in order to best fit your new needs. They can help you amok he necessary changes to continue on your way to more financial freedom. 

It can be very stressful to have to deal with change in your life. There are so many unknowns regarding how things will actually look in the future. 

Eliminating as much stress as possible will help the transition be much smoother; this can be done by working with a financial advisor. 

Following Your Financial Advisors Advice 

Speaking with financial advisors and getting their thoughts and advice is the first step to greater financial success. 

But the most important part of that success comes when you act on the advice given. Taking action on the investments and opportunities presented will give you the best results. 

If you want to learn more about financial advisors, good investment practices, or other wealth management tips, check out our blog for great advice! 

Follow the Money: What Do Investment Banks Do?

There are several different types of banks and institutions out there. By knowing what these banks do and how they differ, you’ll be able to improve your financial literacy and make better investing decisions. 

So, what’s an investment bank? And what do investment banks do?

An investment bank essentially acts as an intermediary institution that performs a variety of services. The majority of investment banks specialize in complex and big financial transactions. These kinds of banks help businesses make financial decisions and raise the capital they need. 

But there’s a lot more to it than just that. Are you interested in learning more? If so, then continue reading and we’ll walk you through everything you need to know!

How Do Investment Bank Works?

There are two main divisions of investment banks worth knowing about. The first is the advisory division, which is paid a fee for their work. There is also the trading division, which realizes losses or profits based on their performance in the market.

A person who works in an investment bank might have a career as a salesperson, trader, or financial advisor. While a career at an investment bank could be lucrative, it typically also involves a lot of stress and long working hours. 

Investment banks are best known for their financial intermediary roles. This means that they help businesses issue new shares of stock in an initial public offering (IPO). They also assist businesses to obtain debt financing by attracting investors for corporate bonds. 

The role of the investment bank starts with counseling before the underwriting process even starts. It then continues after the securities are distributed as they continue to offer advice. 

Investment banks also look at the accuracy of the corporation’s financial statements and they write papers that explain the offering to investors. The clientele of investment banks tends to consist of:

  • hedge funds
  • governments
  • corporations
  • other banks
  • pension funds

Many investment banks tend to use their size to their advantage. The more well-connected an investment bank is, the more likely it’s going to profit. It does this because it’s better able to match sellers and buyers. 

Many large investment banks have customers all over the world. 

What Do Investment Banks Do?

Investment banks perform a variety of functions. Often, they will act as the financial advisor to powerful institutional investors. An investment bank is supposed to be a trusted partner that provides strategic and useful advice on all kinds of financial matters. 

They’re able to do this by combining their ability to evaluate and spot investment challenges and opportunities along with understanding the desires of their customers.  

Investment banks also deal with mergers and acquisitions. During this process, the job of the investment bank is to determine the value of a possible acquisition and to help the parties come to a fair price. The bank will also help with executing and structuring the acquisition so that they can ensure that the deal goes as well as possible. 

Research is another important service that investment banks deal in. The research divisions of these institutions review companies and then write documents about their prospects. They will usually include “buy,” “sell,” and “hold” ratings. 

Although the research won’t bring in revenue on its own, the information that they come up with is used to help traders and sales. Investment bankers also get publicity for their partners and clients.

The research is also going to act as investment guidance to outside customers. This will hopefully get the clients to take the advice and execute a trade via the trading desk of a bank, which will then lead to increased revenue for the bank.

The research division is what powers an investment bank’s ability to conduct quantitative analysis, credit research, macroeconomic research, and fixed income research. All of this will then be used both externally and internally at the bank.  

Underwriting Deals

Investment banks will usually underwrite deals while they’re also arranging capital markets financing for their customers. This means that they manage the risk that comes with the process of purchasing the shares of stock from the issuers and selling them to institutional buyers or the public. 

Investment banks purchase shares at one price and then add a markup to the sale price. This brings them a profit that makes up for the risk that they’re taking on. This is also known as the underwriting spread

There will usually be a head investment banker who works with a group of investment bankers. This group is referred to as a syndicate and they all work together to underwrite an issue. This helps to spread the risk out among everyone. 

An underwriter will sometimes just play the part of a go-between for marketing deals. They help to market the stock but don’t take on the risk that comes with underwriting. When this happens, the investment bankers will be able to sell shares and get paid on the basis of commission. 

The Importance of Knowing About Investment Banks

Hopefully, after reading the above article, you now have an answer to the question, “what do investment banks do?” As we can see, investment banks tend to work with large institutions and perform complex deals that can involve enormous amounts of money.

And even though many people might not directly interact with an investment bank, the actions that these banks take can affect a variety of people, especially those who invest. And by knowing how these banks operate, you’ll be better to make more informed and confident financial and investing decisions.

Are you wondering if now’s a good time to invest? If so, then make sure to check out our other articles for more!

7 Factors to Consider Before Choosing an Investment Banker

The total revenue for 12 of the largest investment banks was $147.5 billion in 2019. While the revenue was a 4% decrease from the previous years, investment banking remains a crucial aspect of the economy. Consequently, there has been a surge in the number of investment bankers.

Selecting an experienced and qualified investment banker can be daunting. You need to be critical in your vetting as the choice of investment banker will impact your transaction experience. A professional investment banker will give you the best advice, negotiate with the utmost prowess, and ensure that you get the best deal.  

Are you looking for assistance in managing your investments? Here are factors you might want to consider when choosing an investment banker.

1. Reputation 

The reputation of a bank is an essential consideration. However, the character of the people transacting on behalf of the bank is more crucial. It would be best if you vetted an investment banker as an individual.

Check their past deals. Do they have a track record of success? The main areas to consider are the banker’s industry, the size of the deals closed, and the transactions involved.

Your chosen investment banker should be someone whose reputation is commendable. You can research and vet more to know the type of person who will be handling your investments. 

2. Chemistry and Trust 

You don’t want to take chances collaborating with an investment banker you can’t trust. You will be entrusting all your financial transactions based on advice from this specific investment banker in the long-term. The process will undoubtedly be time consuming and intimate.

As such, ensuring that you develop synergies with the investment banker is necessary. Chemistry refers to the inherent feeling of being comfortable listening to your banker’s advice. You’ll also need to ask relevant and somewhat delicate financial questions over time. 

It would help to focus on the chemistry when shopping around for an investment banker. If the chemistry isn’t there, you might end up dealing with a more stressful situation. Trust, on the other hand, is non- negotiable. 

You can’t afford to deal with someone you can’t trust. Trust must be at the centre of any relationship with an investment banker before committing to a long term engagement. This is especially crucial considering the value of your investment. 

3. Get a Relational Investment Banker 

In investment banking, creating rapport with clients is essential. You need to prioritize a banker with essential relationship skills. While the skill is intangible, it’s one of the most critical for investment bankers.  

The stakes in investment banking are quite high. An investment banker with the right social skills and attitude will address extreme conditions and individuals. Nothing is more fulfilling than having an investment manager who understands you!

You’ll be communicating with bankers often when running a transaction. It would help to identify bankers with the right communication skills. Within the first encounter, you can gather clues that will determine whether the banker has the right set of communication and relational skills.

4. Valuation and Fees

Cost is always a factor when choosing a reliable investment banker. You want to understand the cost implications before committing fully to such services. The banker should be able to present an accurate cost of services.

While you might be keen to attract someone who charges the lowest fee, it would help focus on the ROI. Your goal should be to work with someone who has the highest qualifications.  It would help balance the need for a pocket-friendly deal with a highly reliable banker to ensure value.  

It would also be essential to ensure that you understand all the hidden fees and any other charges before hiring an investment banker.

 When it comes to valuation, a good banker should keep up with the trends in your specific industry. This helps in interpreting the market activities and their impact on the value of your valuation. Ensure that you understand the range of valuation before committing to hiring.  

5. Availability of Resources 

A reliable bank should have adequate resources for your deal. If a firm has large teams, they are unlimited on the financial transactions it can handle. While this might be a positive aspect of the bank’s view, it might not favour you.

It is best to work with an investment manager who will guarantee you a personal experience. Confirm if they have the right resources. You can check out the different types of investment banking services and the available resources to know if they resonate with your business needs.

6. Transaction Experience

One of the essential factors you might need to consider when selecting an investment banker relates to experience. Can they get the deal done? You don’t want to deal with a novice who might take longer to deliver. 

You also want to rest easy, knowing that your investment banker has the experience necessary to deliver. A banker who has been in the industry long enough understands the dynamics in the sector. The easiest way to validate an their experience is to consider the number of past transactions.

The more the number of transactions the banker has, the more the experience they bring on the table. It would help to consider the level of experience the they have before proceeding to commit. 

7. References and Reviews 

Every investment banker worth their salt has a battalion of loyal clients. Reviews play an important role in determining any business’s repute. Before you decide to hire an M&A specialist, consider the testimonials that back up their exceptional services.

Most past customers provide honest feedback on their engagement with respective investment bankers. You can utilize such information to determine the most suitable banker to handle your case. It would also help consider negative reviews as a red flag when dealing with investment banking service providers for the first time.   

The Right Investment Banker Has a Significant Impact on Your Wealth  

Transactions are often laden with challenges. You’ll meet buyers who are more familiar with the market than you, leading to disagreements. With an experienced investment banker, you can rest easy knowing that the process will be seamless. 

You need to familiarize yourself with the banker’s skills and experience. Thorough vetting will enable you to settle for the best talent around. 

Contact us today for compelling articles on financing.

7 Benefits of Using Private Banks for Small Businesses

When considering your options about your finances and your new business, the tendency is to only consider high street banks.

This might not always be the best option for you and your business. It is essential to consult all the types of banks that are available and how they can facilitate your requirements and needs.

Private banks might just be the way forward when looking at a bank to store and manage your company’s finances and outgoings.

In this article, we will go through and explain 7 benefits of how using a private bank can help small businesses and why you should choose one.

Read on to find out more about private banks and why they could be the solution for your business.

1. Private Banks Offer Additional Support to Their Clients 

Private banks are run in a different way than average high street banks. They actively work with their clients and can offer tailored advice on not just various financial aspects of their business, but their personal finances as well.  

Private banks are able to go above and beyond for their clients in terms of managing their assets, wealth, and finances and give an in-depth analysis of what a client should be doing with their projections and future investments.

2. Private Banks are Highly Personalised For Their Clients

A real benefit of choosing a private bank over a regular one, is you are often assigned a private banker who manages your account. This means that a singular person is in charge of your finances, and has a much greater understanding of your goals and has a keen knowledge of your business. 

They are able to actively recommend and advise on your finances whilst developing a relationship with you.

You are able to have confidence in your own personal banker who will be proactively searching for the best investment options and course of action for your business. 

3. You Have a Direct Line to the Bank

Often one of the most frustrating things with traditional banks, is that if you need an issue resolved or have a question that needs to be answered, you might have to ring and wait for hours on hold to speak to someone. 

The person you eventually get through to has no knowledge of your business, and you will probably need to repeat yourself a few times whilst you are transferred to different departments.

This whole process can be incredibly time-consuming and frustrating, and you might not even get the resolution or information you need.

With private banks, this is never an issue. You often will have a direct line to your own personal banker, who is completely in tune with your finances and is able to facilitate your requests much quicker than a regular bank.

4. Private Banks and Bankers Fit into Your Financial Support Network 

If you have other elements to your financial support network such as an accountant or lawyer, the private bank or banker will be able to take an active role in this infrastructure and speak to them regarding any issues or financial information.

This connection between the various aspects of your financial support system can be integral to how your business can develop and grow. This is not something that can be achieved or managed using a regular bank.

5. The Relationship is Tailored and Flexible 

When beginning an account with a private bank, you will have a meeting to discuss everyone’s expectations and what you are wanting out of the relationship between your business and their bank.

You are able to tailor a schedule of how often you should meet and what needs to be discussed at these meetings. And if they need to be done in person, or whether a phone or video call will be adequate.

The benefit of a private bank is that the contact and schedule of the client and bank relationship is personalized to the client’s requirements.

6. The Bank Will Assign You a Banker Best Suited to Your Account 

This is dependant on the bank you decide on, but private banks will take a look at your application and make informed choices based on who at their company will be the best fit for you.

Bankers will have specific knowledge and expertise in certain industries and sectors, the bank will always try and match a client with an employee who is most qualified to handle your finances. 

7. Private Banks Offer Additional Perks

If you qualify for certain VIP services then you might have access to some great perks or discounts.

Some banks offer premium travel services or favorable mortgage financing and options with discounts on fees and reduced interest rates.

There are some that offer free worldwide travel insurance, discounts on hotels and give you a certain number of points every year to redeem on holidays and breaks away. 

It is worth enquiring with a private bank to see what type of perks and discounts they can offer you if you become a client. These options could help you save or redeem hundreds of pounds in your private finances. 

Private Banks: Where Can I Find Out More?

We hope you have enjoyed this article explaining the benefits of choosing a private bank for a small business. 

The focus is always going to be on personalization and quality service with private banks. You do not have access to that level of care and proactiveness with a regular bank.

If you want a bank that will act as a consultant, who will be supporting you at every stage of your financial cycle, then a private bank might be the option for you and your business.

If you have any further questions about the benefits of private banking, why not check out our previous blogposts? Or contact us directly?

7 Mistakes to Avoid When Opening a Business Bank Account

When you’ve just begun a new business venture, one of the first things that you’re advised to do is open up a business account for the company. But, when you’re opening a business bank account, there are somethings that you’re going to want to avoid at all costs.

What should be avoided? We’re glad you asked because in this article we’re going to give you a list of things that you should try to avoid doing at all costs.

1. Incomplete Account Information

When you attend your account opening appointment, ensure that you’ve got all the documentation you need. And if you’re not sure if the document is required it’s best to bring it along just in case.

Before attending your meeting when setting up the appointment check with the bank about what documentation is required. This will reduce the likelihood that you don’t have all the information needed to begin setting up your account.

Having missing information could mean having to reschedule your appointment altogether.

2. Using Your SSN Instead of FEIN

If you’re not aware of what these initials stand for the first is your social security number and the next one is your federal employer identification number. When you arrive for your meeting ensure that the number you place on your account is your FEIN and not your SSN.

Many business owners that are just starting out make the mistake of placing their SSN on the account, which can prove problematic in the future especially when it’s time to fill out tax documents for your business taxes.

Anything that requires a number for your business should almost always feature the FEIN that was assigned to you when you filled out the paperwork to register your company as an LLC.

3. Having One Account

Some people may think that there’s no way they’re going to mix up the money that’s deposited into their account if they keep one account for personal and business needs. But, the reason that it’s recommended you have separate accounts is so that you don’t experience issues when it comes to doing your taxes, accounting needs, etcetera.

Another reason that you want to keep your accounts separate is that you’ll want to refrain from being tempted to reach into the money that is designated to the company. And if you’ve only got one account, it can be challenging to differentiate between your personal funds and the business funds.

4. Check-Signing Access

If you’ve got a business partner or plan to take on one in the future, you need to ensure that you provide them with access to sign checks. If you don’t provide your partner with check-signing access you’ll be the only one able to deposit checks or a check may be flagged if your partner attempts to sign it.

To avoid wasting time and becoming frustrated, ensure that you’ve taken care of this minor detail beforehand. You never know when you’ll need that check deposited, or you may be out of time and not able to do it yourself.

5. Picking the Wrong Bank

Not all banks are created equal, nor do they all offer the features that you would be looking for when it comes to opening your business account with them. The bank you choose may have strict limitations on what they will allow a new business owner to take out when it comes to business credit.

Another thing you’ll want to watch out for are banks that are new and not as well known. The reason that you want to steer clear of these banks is for the protection of your company money.

When it comes to your business banking account, you want to make sure that you’re able to meet the requirements of the bank and protect your money at the same time.

6. Minimum Monthly Balance and Fees

Another common mistake made by small business owners is not taking note of the minimum monthly balance. This means that at the end of every month, your account must have a specific amount in it or you’ll face some kind of monetary penalty.

You’ll also want to ask about any monthly maintenance fees that will be deducted from the account. It’s also beneficial to ask if there’s anything that you can do on your side that will wave additional fees such as making a large transfer to your business savings account.

Speaking of your business savings account the typical bank will only allow you to make a specific number o withdrawals from this account every month. If you exceed the number of acceptable withdrawals, you may face a monetary fine.

7. Ordering the Wrong Checks

Ensure that when you’re ordering checks for your business, the correct name is printed on the checks. Some people make the mistake of using other names or their personal names on the check instead of putting the name of the business.

The reason that this is problematic is that when a processor of a payment goes to put a payment through to prevent fraud, they ensure that the name on the check is legit. If your name or another company name appears, then it could lead them to flag the payment as a fraudulent payment.

This would then leave you having to be on a lengthy phone call explaining the mistake and inevitably having to order all new checks. Avoid this from the beginning and ensure that the checks you’ve ordered for your business have the legal name of the business that appears on all your company paperwork.

Trust us, no one wants to deal with the headache of having to wait for checks to arrive in the mail.

Business Bank Account Mistakes Avoided

Now that you know all of the mistakes not to make when opening your business bank account, you can open your account. Avoiding the mistakes listed above will help you to save valuable time and frustrations correcting your mistakes.

If you’ve found this article useful, then you’re going to want to check out some of our other articles. Our site focuses on providing engaging and informative content about things like finance and business every day.

You won’t want to miss out on the advice offered on our site.

7 Questions to Ask Before Choosing Banking Services

The number of unbanked Britons currently stands at around 1.2 million. Banks in the United Kingdom play an essential role in bridging the individual and business-related financial needs. These financial institutions provide access to lending and borrowing facilities on top of offering safe volts for savers. 

As a client, choosing a bank that serves your needs is never easy. It would help if you considered a wide range of factors before settling for specific banking services. A reliable banking services provider should be able to guarantee you security, convenience, and cost-effectiveness. 

Are you in the process of selecting a banking services provider? Vetting such potential financial institutions is vital. These eight questions can help you probe such prospective banking service providers before entrusting them with your financial needs. 

1. How Much Are the Bank Charges?

Let’s face it; cost is the main deal-breaker when choosing a banking services provider. You might need a clear summary of the banking charges before selecting the right bank for you. Consider the summary of all the costs, terms, and conditions stipulated by the institutions before making a decision.

You might need to ask the potential service provider about any extra charges attached to their bank cards. This question will also help you figure out other management fees that apply. Some banks charge a fee for keeping your current and saving accounts.

It’s important to consider all these charges before making a decision. These standard banking fees should help you determine whether the potential banker is convenient for you. 

2. What Are the Digital Services Available?  

Every sector of the economy has since gone digital. The banking sector is not an exception.

 Most banking services providers now offer online services. However, there’re disparities on the different platforms and the range of services each bank offers. A reliable banking services provider should provide online services that help you save time and money. 

Online banking services should also be available at all times and on any device. Today, over 2.5 billion people globally have access to smartphone devices. As such, a suitable banking services provider should offer online banking services and mobile banking options.

Digital banking plays a vital role in bridging the gap among unbanked citizens. The Union Bank of the Philippines has been at the forefront in providing digital banking services to these unbanked populations. 

3. What Are Your Account Requirements?

Before you settle for a banking services provider, it would help to consider the dynamics related to account opening. You don’t want to end up selecting a specific bank only to learn about unfavourable account opening requirements later. 

What are your potential bank’s minimum requirements when opening an account? You might need to consider the minimum balance you need when opening an account. Further, it would help to consider the minimum balance that your account must have to remain active. 

Be sure that the underlying account requirements are stipulations you can easily manage. This will limit the risk of surprises in the future.  

4. Do You Allow for Overdraft?

Sometimes your account balance depletes below the withdrawable minimum. When this happens, most customers result in overdrafts. It’s important to understand beforehand if your bank allows overdraft transactions.

You would also want to be sure that the bank charges manageable charges when you overdraft. It would also help to gather information on whether your bank allows for overdraft protection. This is where you have the option of covering an overdraft with money from a different account. 

5. Do You Have a Branch Near Me?

Online or digital banking introduces remarkable ease and convenience when accessing financial services. Some particular needs or queries may require a physical meeting with a representative or the bank manager. It’s comforting to know that you have your money in a bank where you can walk in and out at your convenience.  

You might need to consider an institution that’s closer to your work or home. It’s safer to spend your time researching on banks that are closer to you on top of fitting your criteria. A bank that’s close enough makes the process of filing and receiving feedback on complaints easier.

6. What Other Services Do You Offer?

Not all banks are the same. Financial institutions offer different banking services that suit varying customer needs. Talking to bankers can help you unpick the unique services on offer. 

Apart from lending and borrowing, banks also offer a wide range of differentiated services. It would help to consider these unique services when considering a bank. For instance, banks that provide both regular banking and Islamic banking show a unique sense of inclusivity. 

It would be best if you also considered a bank with unique facilities such as investment and wealth management. Partnering with the Union Bank of Philippians ensures that you have access to private, wealth, and investment management.

7. Are There Withdrawal and Transfer Limits? 

You don’t want to end up working with a bank that limits you. Part of the need to have a convenient banking service is to expand your freedom when making transactions. It would be objectionable to rack up interest on your hard-earned money, yet have limits when it comes to withdrawal.

If you intend to save up considerable amounts of money in your account, this question is essential. Ultimately, how much you can withdraw should interest you. You don’t want to end up having to borrow money elsewhere while there’s money in your account due to limits. 

8. Do You Have Testimonials?    

There’s nothing more important than a reputation when dealing with a banking services provider. This is why references and reviews should be at the centre of this vetting process. Can your potential bank present a list of testimonials for exemplary services?  

Positive reviews play an essential role in determining a bank’s reputation. Consider testimonials as one of the determining factors when dealing with a banking services provider. 

Vetting Your Prospective Banking Services Provider Is Non-Negotiable  

Finding a secure and convenient way to bank your hard-earned money is vital. You don’t want to end up feeling frustrated when trying to access banking services. Convenience, affordability, and accessibility should be at the centre of your selection process.

Are you looking for a reliable banking services provider? These eight top questions can help you get a secure banking facility as soon as possible. At Union Bank of the Philippians, our impeccable services and products are the perfect answer to these questions.  

Have you been looking for a bank that encompasses convenience and safety under one roof? Visit our page for more resources.

Is Investing in Green Energy Financially Savvy?

The global market for green energy is expected to grow to a value of $1.5 trillion by 2025. 

When you consider the fact that this was a market that barely existed a few decades ago, it’s obvious that investing in green energy has made many people rich. It’s also going to continue making people rich for as long as the world needs renewable energy, which is likely to be forever.

The question, therefore, is this: what is the best way to make money from the green revolution if you’re new to the game?

Read on as we look at the answer to that question and set you on the path to becoming a profitable green investor.

The Different Ways of Investing in Green Energy

There are many different ways to get exposure to green energy. The right one for you will depend on your risk appetite, the amount you want to invest, and whether you want to be actively involved in the investment.

We’ve looked at the different options in more detail here.

Starting a Business

If you want to take an active hand in the green energy market, you could set up a business in the field. There are a few different options here.

Wind and solar energy are the two main forms of renewable energy in the world today. If you enter this industry, you’ll likely be setting up either a wind farm or solar farm.

This is, of course, specialized work. You’ll need an educational background in energy or physics, and you may need prior professional experience of working with renewable energy.

In order to produce energy on an industrial scale, you’ll also need to make a considerable initial investment. Solar panels and wind turbines are both expensive to buy in bulk. They also take up considerable space, which means that you’ll need to have a large plot of land to work on.

Buying Stocks

If you don’t want to set up a green energy company yourself, you could choose to invest in one that’s already in operation.

There are many different options here, from established energy giants to brand new operations. The latter will not feature on public stock exchanges, however, so you’ll need to look to different investment platforms for these.

If you invest in a new start-up while its shares are cheap and it goes on to create highly valuable energy solutions, you could end up multiplying the value of your investment many times over. On the other hand, if the company goes bankrupt, you’ll lose all your money.

If you’d prefer a lower-risk stock investment, it might be a good idea to look for a publicly-traded, blue-chip green energy company.

Investing in a Green Mutual Fund or ETF

This is similar to investing in green stocks. It will offer passive exposure to the green energy market, giving you financial benefits if and when the market as a whole improves.

The key difference between this and the option of buying company shares is the risk-reward profile. Because funds diversify your investment across a large number of ventures, you won’t lose all your money because of one company’s bad decisions.

However, you will also have a much more limited growth capacity. 

There are a couple of important differences between an ETF and a mutual fund. Most significantly, a mutual fund is actively managed, which means that fund managers will pick up and drop stocks in real time on the basis of market trends.

ETF managers, on the other hand, pick a basket of stocks or index at the fund’s inception and leave them in place regardless of trends. Because of this passive strategy, ETF fees tend to be much lower.

Setting Up Solar Panels or a Windmill

This admittedly isn’t an investment in the business sense. However, that doesn’t mean it’s not a great bet.

Recent COVID-19-related dips aside, fossil fuels are getting more expensive. As oil-producing countries tinker with the supply chain and the reserves of natural fuel continue to dwindle, the price of non-renewable energy will eventually become unsustainable.

When that happens, the homes and businesses that are self-sufficient in terms of energy will be much better off. If you live in an area that gets a lot of sun or wind, this is something you should consider.

The Advantages of Investing in Green Energy

The main advantage of investing in green energy is the market outlook. There aren’t many industries with as bright a future as renewable energy.

Green companies also benefit from government subsidies and tax breaks in many areas. Because many places desperately need green energy, ruling bodies are happy to incentivize its development in whatever ways they can.

To make the most of this, you should research political attitudes to green energy in a given country before deciding to invest in a company from there.

Depending on the investment you make, you might also be helping to fund a company that makes a real breakthrough in the field of clean energy. There are countless capable energy specialists that only need start-up capital to start building the energy solutions of tomorrow.

Investing in the Energy Solution of Tomorrow

When it comes to investments with future value potential, you might find it difficult to come across a better option than green energy. Our planet’s energy requirements are massive, and continuously growing, while non-renewable energy resources continue to dwindle.

Investing in green energy is therefore likely to be a successful strategy. However, to make sure you take on an investment that suits your goals and outlook, you’ll need to do a little research on the various available options.

To learn more about investment opportunities, check out our finance section.

What Happens When You Declare Bankruptcy in the Philippines?

After East Asia’s financial crisis in the 1990s, middle-income countries including the Philippines made up 80% of the total East Asian bankruptcies filed

Do you know what happens when you declare bankruptcy in the Philippines? We’re coming up on another financial crisis, so now is the best time yet to learn your legal rights. That’s why we created this guide. 

Are you considering filing bankruptcy in the Philippines and want to know what to expect? Then you’ve got to keep reading because this article is for you.

What Exactly is Bankruptcy?

Bankruptcy is a legal process that takes place after an individual or company has defaulted on a debt. 

Filing bankruptcy allows individuals options to either repay or offer collateral to erase their debts. At the same time, bankruptcies allow the bank or other lending institution to remove bad debt from their ledgers. 

When the bankruptcy filer can’t repay debts, they typically end up divesting an asset. An asset is anything a company or individual owns outright. For example, buildings, homes, cars, etc. 

The Philippines Bankruptcy Law: The Financial Rehabilitation and Insolvency Act

The Financial Rehabilitation and Insolvency Act (FRIA) legally allows the declaration of bankruptcy in the Philippines. Individuals can file for personal bankruptcy. Companies will file for business bankruptcy. 

In the Philippines, there are three ways to file bankruptcy legally. We’re going in-depth with each method next, so check it out.

Suspended Payment

In some cases, an individual or business filing for bankruptcy can repay the debt over time. A Philippines court will restructure the debt payments to allow for a longer period of repayment. 

Suspended payment bankruptcies are allowed when:

  • The debtor has the collateral to cover the debt but can’t meet payments by their due date
  • The debtor presents a restructuring payment plan that is both possible and agreeable to the lending party
  • Creditors or lenders who hold 60% of more of the debt liability get together and agree on the debtor’s proposed repayment plan

Once the lender agrees to the debtor’s restructuring strategy, the debtor can proceed with the suspended payment bankruptcy agreement. 

Voluntary Insolvency

With voluntary insolvency, an individual or business defaults on a debt. Unlike suspended payment bankruptcies, voluntary insolvencies allow debtors to voluntarily give up assets to repay debts. 

To file for this type of bankruptcy, the individual or company must have assets that sufficiently balance out the debts owed. However, these debts must be in excess of P500,000. 

Individuals or businesses filing for voluntary insolvency are responsible for petitioning the court. The court will then determine whether the collateral offered is equal to the debts owed.

Within five days of approving the petition, the court will issue a liquidation order. Liquidation orders allow the original lenders to claim the proposed collateral to settle the debt.

Involuntary Insolvency

Involuntary insolvency is different from both suspended payment and voluntary insolvency bankruptcies in the Philippines. Why? Because Philippine creditors and lenders, not debtors, initiate involuntary insolvency.

Under FRIA in the Philippines, lenders with claims of P500,000 or more can file a petition with the courts. The court should be that of the city or province where the debtor lives. 

This petition will outline that, upon default of the debt, the creditors will seek liquidation. If the debtor does default, the court can order the lender to seize the individual or businesses’ assets. 

Civil Small Claims

In some cases, a lender can file a civil small claims case instead of choosing involuntary insolvency. This can only happen for debts of less than P400,000. The proceedings of a small claim case tend to be cheaper and quicker, which is why many creditors are more likely to use it. 

The bad news? Individuals and businesses can’t actually have legal representation in small claims cases. If creditors win, debtors can’t appeal the ultimate decision either. 

What Happens When You Declare Bankruptcy? 

Bankruptcy is an extremely helpful tool for individuals and companies that can’t pay back debts they owe. Yet, bankruptcy isn’t without some serious consequences. Here’s what to expect after filing bankruptcy. 

Your Credit Score Will Drop

After filing for bankruptcy, it will stay on your credit report. The bankruptcy will also lower your credit score. This will make it difficult to open lines of credit or apply for a mortgage in the future. 

You Could Lose Your Stuff

If you go through voluntary or involuntary insolvency, you’re going to lose your assets. Debtors can choose which assets they’d prefer to divest in voluntary liquidation. Yet, if your lender files for involuntary insolvency, you’ll have no control over which assets they take from you.

You May Lose All Your Credit

Many credit card companies will immediately terminate your lines of credit after a bankruptcy. This is especially true if your credit card company is the same bank filing bankruptcy against you. 

You Could Have Trouble Getting a Loan

We’ve already mentioned that a lower credit score means more problems getting a mortgage. This is also true for loans in general. Not only that, lenders see bankruptcies as a huge red flag, meaning you may have to pay ridiculously high interest rates for loans.

You May Not Get a Tax Refund

If you qualify for a tax refund in the same year you filed bankruptcy, you may not receive it. 

You Could Face Difficulties Finding Housing and Jobs

Many employers and building owners pre-screen potential candidates for bankruptcy. Some employers won’t hire you if you’ve recently filed for bankruptcy. Worse, recent bankruptcy can affect your desirability as a tenant. 

More Financial Advice from Capital Finance International

Now that you know what happens when you declare bankruptcy in the Philippines, you should feel confident knowing your rights when you can’t repay a debt. 

Are you looking for more financial advice during these trying times? Then don’t forget to subscribe to our finance blog for new updates every week. 

Cryptocurrency 101: Learn the Basics

Unless you’ve been living under a rock, you’ve heard of cryptocurrency. Cryptocurrency is a virtual currency that could replace our cash system one day. 

Virtual currencies like Bitcoin are working to cut out the middle man in our banking transactions. Read this article to learn cryptocurrency 101 and whether you should invest or pass. 

Cryptocurrency 101

Cryptocurrency is a virtual or digital currency. It is secured by cryptography. Cryptography is a method of encoding and decoding data. Essentially cryptography puts the “crypt” in cryptocurrency. Cryptography makes it almost impossible to counterfeit money. 

Cryptocurrencies (yes there are more than one) use blockchain technology. It works by dispersing a ledger among a network of computers. These computers all work to keep up with it. 

Understanding Cryptocurrency: How it Works

With cryptocurrencies, there isn’t a central authority. They are not issued by a government or a bank. In theory, this makes cryptocurrencies free from government interference or manipulation.

Payments are made online using “tokens”. The ledger keeps track of all the entries and how much currency everyone has. Verifying transactions is usually the role of the banks but cryptocurrency relies on the peer-to-peer system. 

This system allows for your transactions to be secure. It reduces the risk of fraud and allows your transactions to be more transparent. 

Popular Cryptocurrencies 

Bitcoin was the first blockchain-based cryptocurrency. It was started in 2009 by an individual known as Satoshi Nakamoto. Today it remains the most popular and valuable. 

Since Bitcoin started there are now thousands of different cryptocurrencies people can use. Each cryptocurrency has its function in the market. Some of these cryptocurrencies copied Bitcoin and others were built from scratch. 

At the time of this article, USD 27.5 billion BTC has been traded in the past 24 hours. A single token or BTC of Bitcoin is worth USD 9,435.04. 

Other popular cryptocurrencies include Litecoin, Ethereum, Namecoin, Cardano, and EOS. If we calculator the total value of cryptocurrencies all together that number would be around USD 251.8 billion. To put that into perspective that is about 0.7% of the world’s money. 

Is Cryptocurrency Safe?

Cryptocurrency experts would remind you that Investing is always a risky business. However, Some traditional experts say investing in cryptocurrencies, like Bitcoin, is even more of a risk. 

The world has been caught up in “crypto-mania” as people began buying and selling cryptocurrency like stocks. We’ve all heard the stories of people who became millionaires overnight thanks to Bitcoin business opportunities. 

We’re not going to suggest investments. That should be left to you and your portfolio manager. However, we will say you shouldn’t invest in something you don’t fully understand. This advice goes for any investment. 

Pros of Cryptocurrency

There are a lot of pros of cryptocurrencies. Cryptocurrencies make it much easier for two parties to exchange funds. No longer do you need a bank or credit card company to serve as a middle man. 

The transfers are secure. There is very little risk of counterfeiting or double-spending. They are also completed with very minimal transfer fees. The fee is much lower than the charge for a wire transfer from a bank. 

With more customers choosing to make payments from their mobile phone, tablet, or Apple Watch, cryptocurrency is a cheaper and more efficient system for payment. 

Cryptocurrencies have the potential to create a borderless, global economy. That’s a win for everyone (well, maybe except banks). It can help fight financial inequality by taking out the bank and credit card middlemen and bring financial services directly to the people.

Cons of Cryptocurrency

Cryptocurrency sounds great but there are a few drawbacks to blockchain the technology it is based on. For one, blockchain isn’t as scalable as centralized banking systems. If you’ve ever made a bitcoin transaction then you noticed it took some time to complete. 

Remember the ledger we talked about? The blockchain network of computers is kinda slow to make changes to the ledger. And if you think it is slow now just think about how slow it would be if more people started using bitcoin!

Another common issue is that you can lose your cryptocurrency hack. When you purchase cryptocurrency most people store it in their wallet. Wallets are located on the exchange.

Billions of dollars of Bitcoin and other cryptocurrencies have been lost on the exchange from hackers. 

A smarter place to store your cryptocurrency would be on your smartphone’s cryptocurrency wallet because generally speaking, smartphones are not hacked. 

But even if you use a wallet on your smartphone it is still possible to lose your cryptocurrency. You could misplace or forget your “key” or password for the account. There is no forgot my password link to click with cryptocurrencies.  

Your phone’s OS, operating system, could also become corrupt. This could delete your wallet from your phone. Bye-bye cryptocurrency. There is hardware now available for people to back up and secure their wallets. 

Trading Cryptocurrency 

If you are trading cryptocurrencies, there will be fees involved. These fees are still a fraction of a per cent of the total transaction amount depending on the cryptocurrency exchange you use. You can also avoid some fees by using your wallet.

The fees involved will vary depending on the total number of people who are buying and selling your particular cryptocurrency.

In general, the more people the higher the fee. In the beginning, when most people had never heard of trading Bitcoin the transaction fee was around 6 cents. Today that fee is much more and it is always changing. 

Consult With Your Financial Advisor

We hope you enjoyed reading cryptocurrency 101. Many positive benefits could come from a virtual currency like Bitcoin or others. There are also many other positive benefits blockchain technology has in healthcare or voting systems that are also being explored. 

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