Business banking unit1

THE UGANDA INSTITUTE OF BANKING & FINANCIAL SERVICES

UIBFS

ISO 9001:2008 CERTIFIED

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Module 4: Business Banking


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LEARNING OBJECTIVES • Define business customers and explain their common

banking needs • Explain the types of lending in foreign business transactions• Explain the basics of lending to the agricultural sector • Articulate features of lending to the construction and

contracting sector• Discuss the main forms of business finance in Uganda• Correlate the business practices to the present situations

prevailing in the country, and effectively appraise businesses


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Understanding the Business Customer

Understanding the Customer’s Business

Assessing Customer Needs

Lending in Foreign Business Transactions

Financing Property Developers and Contractors

Financing Agricultural Projects

MODULE COVERAGE

Alternative Sources of Business Finance


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Understanding the Business Customer Who is the business customer to a bank? This is a customer

(sometimes known as industrial customers) who is in an economic activity which they either own, control or both own and control.

They purchase products or services to use in the production of other goods/products and services to satisfy wants and needs.

The business customer’s banking needs are often tied with the need for smooth running, profitability and success of their businesses.

It is rare that these businesses related banking needs are completely de-linked from their personal banking needs.


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Types of businesses and their financing needsBanks’ business customers vary in their size and what they do.1. Large size productive businessThese are large, productive businesses like factories, farms and

processing plants. These need term loans and equity financing at start or as they are expanding, steady and revolving finance for working capital and leasing for vehicles and other equipment. The larger the enterprise, the more complex and bigger the financing needs can get.

2. Medium size productive businessesThese are medium sized productive businesses which have their fixed

capital in place but they mainly need working capital. For these, short term loans and overdrafts are useful and sometimes critical.


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3. Small size productive businessesThese are very small productive business and medium/small retail

business that need modest amounts of working capital. Their needs range from bank type short term loans to microfinance loans.

4. Large size service businessesThese are large service businesses like construction/ contracting,

transport, hospitals and schools. These typically have peaks and troughs in their business volumes and

therefore in their cash flows and financing needs. For them, overdrafts are the most common type of financing needed although at establishment and expansion, they also need long term finance.

It is important for a banker to know the industry in which the business customer works and the cash flow realities of the sectors.

Business banking unit1

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