Merchant Banking

In banking, a merchant bank is a financial institution primarily engaged in offering financial services and advice to corporations and wealthy individuals on how to use their money.Merchant Banking is a combination of Banking and consultancy services. It provides consultancy to its clients for financial, marketing, managerial and legal matters. Consultancy means to provide advice, guidance and service for a fee. It helps a businessman to start a business. It helps to raise (collect)finance. It helps to expand and modernize the business. It helps in restructuring of a business. It also helps companies to register, buy and sell shares at the stock exchange.

FUNCTIONS OF MERCHANT BANKING

DEFINITION of 'Venture Capital'

Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not Have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. Most venture capital comes from a group of wealthy

investors, investment banks and other financial institutions that pool such investments or partnerships. This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt.

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.[1][2][3][4] A business will sometimes factor its receivable assets to meet its present and immediate cashneeds.[5] [6] Forfaiting is a factoring arrangement used in international trade finance by exporters who wish to sell their receivables to a forfaiter.[7] Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing. Accounts receivable financing is a term more accurately used to describe a form of asset based lending against accounts receivable.[8]

Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations (for example, payroll), and is backed only by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note.An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.