Functions of Merchant Banking with Definition & Meaning

Learn about financial and managerial functions in merchant banking, complete with definitions and implications for customers today.

The Merchant Banks Definition

These banks have been a huge asset for people across numerous countries and communities. The merchant banker operation can best be described by the many functions it provides to the business community, as follows:

Specialized Merchant Banking Functions

See the different financial and management functions performed by these banks in serving their customers across the globe, as follows:


1. Financial Functions of Merchant Banking

Merchant banks are financial institutions, similar to investment banks, which provide financing to their customers. They handle a wide range of financial needs of their customers. Some of these may include underwriting, investment banking, consultancy services, trust functions, private equity, and more. When the customer needs to raise funds, these banks step in to lend assistance. If the customer is looking to invest in stocks, then banks serve as brokers for stock market. They serve as investment banks and purchase and sell stocks on behalf of a client, as well as perform research in the stocks.

Leasing is also part of a traders banking functions. They also handle the dividends and interest of loans and debt instruments, and help in investment decisions. Portfolio management services are also a major function of the commercial banker. They ensure that a clients investments are secure, profitable, and liquid through portfolio management. Any company seeking to improve its positions for capital, finance and cash flows can seek their service.

2. Management Functions of Merchant Banks

Merchant banks also serve as project managers, offering project management services to their personal and institutional clients. If the company is looking to become modernized or expanded, the bank offers advice on modernization and expansion to the client. The business banker may assist in advertising activities for raising funds via institutional investors, public securities, or through other means.

They also handle public offerings by companies, providing guidance about the timing, size, and pricing of the issue, as well as helping in appointing brokers and underwriters. They perform services such as investment banks for raising VC funds in the money markets.

You may also engage merchant bankers to manage issues and for advisory services. If the company has taken on an industrial project, these banks will manage the job with government approval. Merchant banks also supplement services from retail and commercial banks.

They offer consulting services on projects as well as other services. One of the important functions of commercial banks is the provision of specialized help for entrepreneurs and small businesses. They assist them in taking advantage of public policies, subsidies, and incentives. They assist in getting approval from the government when needed.

Learn More about the role and professional service of merchant banking:

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