Commercial banks will be enormous for people who want convenience and simple accessibility. People who want a more individual banking practice possibly won’t like opening an account with a commercial bank. This bank gives minimum interest to depositors and demand maximum interest from the borrower. You should take the time to assess the advantages and disadvantages of a commercial bank before deciding on opening an account.
Below explain Advantages and Disadvantages of Commercial Banks –
Advantages
Commercial banks can help small business by making it easier to manage day-to-day financial tasks. An established commercial account with a bank will make it easier to borrow money when you grow your business. The Advantages of raising funds from a commercial bank are as follows:
- Banks provide timely assistance to business by providing funds as and when needed by it.
- Secrecy of business can be maintained as the information supplied to the bank by the borrowers is kept confidential;
- Formalities such as the issue of prospectus and underwriting are not required for raising loans from a bank. This, therefore, is an easier source of funds;
- Loan from a bank is a flexible source of finance as the loan amount can be increased according to business needs and can be repaid in advance when funds are not needed.
- Business management and handling become easier with the commercial bank taking care of economic activities.
- Money borrowing for development of business becomes easier withholding of account in the commercial bank.
- Better resolutions are provided for the business problems as there is a banking administrative designated to work for your business development.
- Employee services are better looked after even after retirement.
Since commercial banks are larger than private banks, the perceptibly will have more locations for customers to access their money. This is very helpful when customers travel and need to access their accounts.
Disadvantages
Commercial bank accounts are often more expensive than traditional bank accounts. Banks may charge fees for night deposits, for processing a certain number of checks and for the payroll services. The major Disadvantages of commercial banks as a source of finance are as follows:
- Funds are generally available for short periods and its extension or renewal is uncertain and difficult;
- Banks make a detailed investigation of the company’s affairs, financial structure, etc., and may also ask for the security of assets and personal sureties. This makes the procedure of obtaining funds slightly difficult;
- In some cases, difficult terms and conditions are imposed by banks, for the grant of loan. For example, restrictions may be imposed on the sale of mortgaged goods, thus making normal business working difficult.
- A commercial bank account is costly than normal bank accounts. Every service availed is chargeable like payroll services, checking or verification of any information; night deposits, etc. have extra charges applicable.
- Some services may not be needed depending on the business you run but you would be charged on the same as they are the part of the deal. Services offered by the banks might differ, therefore, the comparison also differs.
- Bank choice impacts the business and transfers to other banks is time and money taking. Having an account in commercial banks prior to the start of the business impacts the growth.
- Commercial banks have their own advantages and disadvantages therefore, every move has to be counted and taken consciously.
Some commercial banks won’t be helpful for taking out business loans. They would rather deal with individual loans. Some commercial banks have severe guidelines for businesses when they take out a loan.
