A merchant bank is a financial institution that financing foreign commerce.
Such banks transact the following business:
- Accepting bills of exchange (acting like accepting houses).
- Offering long-term loans.
- Financial advisory.
- Fundraising activities for companies and individuals with high equity. Besides, they also do not take deposits.
Merchant banks do not provide their services for everyone.
What does the merchant bank term mean?
The name “merchant bank” usually describes investment banks. This definition is widely used in the United Kingdom. However, in the USA, this value is narrower. Merchant banks focus their efforts on corporations with branches in many countries.
The difference between a merchant bank and investment bank
Even though these two types of institutions are similar, they have some deficiencies.
On the one hand, investment banks offer solutions in the field of initial public offering and shares activities. Investment banks also assist companies merging.
On the other hand, merchant banks work, in most cases, with smaller enterprises that can not attract venture capitalists. Merchant banks may work in collaboration with investment banks as well.