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What Is Specialty Banking?

July 2019 / Share
Aviation businesses are one example of specialty banking customers.

Not all banking needs are created equal. That's where specialty banking for businesses and other entities comes in. Offering a level of service beyond normal arrangements, specialty banking can help organizations access financing and other solutions that they wouldn't otherwise.

There are many reasons why a business or public agency would need specialty banking, whether that has to do with the scale of operations, the business model or the regulations a banking customer faces — like those a municipal government would need to address when issuing bonds.

Read for more information on what specialty banking is and whether your business needs it.

What is specialty banking?

As noted, specialty banking is a service available to businesses and organizations that have specific, advanced needs from their financial institution. Typically, banks will have specialty divisions that cater to such clients with customized solutions and assistance that serves these exact needs. 

So what conditions might necessitate specialty banking?

  • Niche customers: Some businesses thrive by making high-volume or high-dollar-value sales to a small group of customers. Think luxury items or products intended for certain demographics based on location. Such companies would necessarily have more fluid and dynamic banking needs based on the customer base. If one client leaves, it could open a working capital hole that wouldn't easily be replaced by immediately gained new customers.
  • Cyclical markets: Customer demand ebbs and flows in certain markets, which could be an existential threat to businesses like auto dealerships or construction developers when a lull arrives. Specialty banking is a solution for such companies because it can be more responsive to their needs as they develop, like offering a larger line of credit or inventory financing package to weather low demand until the market heats back up.
  • Industry/sector needs: Nonprofits and governments can have fundamentally different needs than businesses, making normal banking products and services ill suited for them. Schools and hospitals may also be considered specialty clients, as they have highly specialized needs when it comes to lines of credit and equipment financing. Bond issuance for city or state governments is a particularly complex issue, one which specialty banks can help address with experience and expertise in such matters.

An example of specialty banking

Asset-based lending is an example that can help illustrate the basic concepts of specialty banking. Consider if a business has a strong asset portfolio, but also low cash flow or new competition that's pilfering sales. A specialty bank may be able to make loans to the business based on the strength of outstanding accounts receivable or owned equipment, which are not conventional measures used in other lending decisions. 

How Vectra Bank can help

Vectra Bank has tools and services that businesses with specialized banking needs demand. For instance, we have divisions that serve aviation businesses — to finance large assets like turbines, hangars and aircrafts — as well as those in energy, which is a constantly changing industry. Vectra  Bank is also equipped to help municipal clients find banking solutions.

Want to learn more about specialty banking and how we can help? Contact your local Vectra Bank today.

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**Important Details**
The information provided is presented for general informational purposes only and does not constitute tax, legal, business or investment advice.

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