Investment Banking 101: Types of Investment Banks

Share on facebook
Share on pinterest
Share on twitter
Share on whatsapp

Investment banks help public and private companies and organizations raise funds in the debt and equity markets. These banks were originally created to raise capital and provide advice on corporate financial strategies such as acquisitions and mergers. Investment banks perform many different functions, such as: dealing with security matters, providing brokerage services for institutional and public investors, providing financial advice to corporate clients, advising on investment agreements, acquisition and merger and much more.

Today, there are also banks which have embarked on bridge financing, foreign exchange and private banking. Find out about the two main types of investment banks.

Basic bank for investing

These types of banks usually issue bonds and stocks to customers for a fixed amount. The bank then invests this amount which the client used to buy bonds and stocks. These types of investments vary from bank to bank. In countries where this type of investment is permitted, investment banks have networks of lenders and financial organizations from which they can benefit. Other banks are also investing in construction and real estate development. Clients with bonds and stocks usually receive payments equal to the amount reached over the amount they invested over a given period.
Both the investment bank and the client make a profit on the amount initially invested by the client. Since these types of banks are well versed in negotiating methods, they are often consulted by companies large and small, as well as corporate partnerships, for business investments such as acquisitions and mergers.

Commercial investment bank

This is the other type of investment bank. These types of banks engage in trade finance and provide capital to businesses in the form of stocks rather than loans. These banks have built their businesses around stock security. These types of institutions only fund commercial companies that are just starting out in the business world. Business start-ups are generally not funded. Commercial banks can only be seen as investment banks willing to invest part of the capital of the organization. The money is placed in the form of capital investments. The company is active and advising on the transaction as a research and consultancy firm. If you want commercial financing, it is better to turn to an investment bank .The primary function of these banks is to provide financial services and advice to individuals and businesses. These banks act as a sort of intermediary between consumers of securities and issuers of capital. Several companies issue these types of securities to raise funds on the stock market. Commercial banks provide customers with better financial options and solutions, and can help customers raise funds more cheaply. These banks can reactivate the economic health of ailing companies.

Paul Ackerman

Paul Ackerman is a seasoned Investor. He spent his earlier years working at the NYE as a broker before starting his own firm in 2007. He has since gone on to teach and lecture in tons of universities around the world about finance, investments and money. He is the author of best-selling book "Investing in Character"

Related Articles

Recent Articles