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Published 17 August 2022
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What is the Difference Between Commercial and Business Banking?

As a business owner, it's likely that you will deal with business banking, so it’s important to understand the various banking terms. Things can get confusing with UK and US banking terms, which can differ in meaning. Read on to find out the differences, and how to choose the right approach.

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In the UK, the terms business banking and commercial banking may be used to differentiate between a bank’s financial services, depending on the size of the business.

‘Business’ banking generally refers to the services used by smaller companies, including sole traders. ‘Commercial’ or ‘corporate’ banking generally refers to the services used by larger enterprises with a high turnover.

What is business banking?

A business bank account allows you to separate your business finances from your personal accounts, making it easier to keep track of your company’s funds.

Traditionally, business banking has been provided by high street banks. However, in recent years there has been a revolution in banking, with online banks – also known as challenger banks – providing more competition in the business banking sector.

Today, businesses have much more choice, with online banks being able to provide accounts with online tools which help businesses keep track of their finances, such as tax bills and expenses.

Typical business bank account features

Carefully check what each business bank account you’re considering offers as standard. These might include:

  • deposits and withdrawals
  • standing orders and direct debits
  • bank transfers
  • overdraft facility
  • access to debit and credit cards
  • online banking
  • telephone banking
  • mobile app
  • accounting tools

What are the main differences between business banking and commercial banking?

In the UK, business and commercial banking are often the same service, offering similar features.

However, sometimes the terms business banking and commercial banking refer to services aimed at businesses of different sizes and complexities.

The term business banking can be used to refer to small and medium-sized enterprises (SMEs); companies which have a small number of staff and moderate levels of turnover and income.

Commercial banking can refer to enterprises on a larger scale. Medium-sized organisations have more complex banking needs and may use commercial banking accounts – for example, to handle overseas operations and complicated supply chains.

A commercial bank can describe a banking organisation that is designed to provide services for large and medium businesses – the term can also refer to a branch of a bank dedicated to commercial clients only.

Corporate banking is another term you may see when looking for business bank accounts. Corporate banking clients may look for help with issues connected to cash flow and working capital management.

How to choose between a business bank account and a commercial bank account

This will depend on the size of your company, as well as a range of other factors.

A business bank account may be the right choice for a small business, whereas a commercial bank account might be a better choice for medium to large businesses.

The most important step to take when looking for business bank accounts is to compare your options. Then decide which account offers you the best tools and features for your needs, such as whether your account is free or there are account fees, and whether the account offers overdraft facilities. Read our guide to learn if you need a business bank account.

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