Difference Between Corporate Finance and Commercial Finance

When you enter the world of finance you will find several terms which will really surprise you and will demand a lot of your attention and know-how. Corporate finance and the commercial finance along with micro finance are some of the terms which you will invariably hear and would definitely like to know how they work and what are the ways in which they are used. Let’s take a view of these terms and the ways they affect the business world.

Finance basically refers to the dealings with money. The money matters can relate to corporate, shareholders, government, banks or even of the personal finance. Whatever the amount and whoever it belongs to things begin to get complex as the money exchange hands and moves between the parties.

Let us understand this by means of an example. An international bank which deals with personal finances often referred to as retail banking and also with the business financing can be seen taking deposits from the customers by means of savings and binds and other financial tools. However, the bank also uses these deposits of the customers to lend the businesses and the corporate for some huge amount and in turn earn some profit out of them. It is this money that they partially give to the personal finance borrowers in the form of profits.

To be precise, let us take examples to understand each kind of finances in exclusion.

  • If the amount of transactions exceeds $200000, it means that the transactions are meant for the large businesses and are categorized under the corporate finance.
  • If the transaction amount is anywhere between $40000 to $200000, the client is supposed to be a mid- sized company and the loans and the transactions are categorized under the commercial finance.
  • Any transaction in the range of $5,000 to $40,000 is invariably dealt with small businesses and the banks commercial departments will deal with them.
  • Below $5,000 – Any transaction which is in this range is often done by the small enterprises and mostly by the small business owners or the start ups. All these are dealt by different set of lenders often categorized as the micro finance part of it.

The above mentioned financial brackets are not the tight compartment dealings and they vary between different banks. However, as the practice goes the ones which involves large amounts come under the corporate finance while those which are smaller in the money matters are considered under the commercial finance while those which are the smallest are taken to be under the micro finance.

So, if we look from the business perspective, corporate finance is more related to the larger businesses and involves generally large sum of money while the micro finance is more of the small businesses or the standalone businesses.

There are rare chances that you will find a bank which can offer you all the loans and the funding options. In fact there are a lot of banks which have separate divisions which deals into the different kind of funding. Commercial and the corporate funding are separate entities and require different set of skills to deal with them. It is therefore required that you find the best options which are suited to your needs better. With the internet widely being used in every walk of life, there are software and the ERP which are used by the lenders to assess the financial status of the businesses and their loan eligibility.

If you look at the micro-finance options, the kind of lending and the companies therein are often require the small amounts as loans. However, being small they are less adapted to meet the norms of the other lenders and often the recordkeeping is not to the desired standards which means that there are chances of discrepancies and you may suffer. However, these lending institutions too have evolved with time and they are more better managed today.

Qualifying the business loans is never an easy task. However, as the loan amount in question increases one can see the complexity of the disbursal process on the high. The reasons are pretty obvious. Higher risk require a strict scrutiny by the lenders when it comes  to the lending decisions. So go all prepared to the lenders for the short term loans online you desire. Lenders are in the business of lending and will never be averse to the lending decisions but they need to be sure of the risk and the ways to deal with it.

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