The word business banking is a later development in the banking sector. Business banking is often used interchangeably with what many people called commercial banking. In a nutshell, it is a type of bank that provides checking accounts, savings accounts, money market accounts, and the acceptance of time deposits.

Historically, this type of banking was introduced in the United States of America after the period of the great depression.  The U.S. congress then enacted that banks should engage in banking activities, while investment banks were then restricted to capital market activities. The commercial or the business banking was then used to refer to a bank or a division of a bank mainly concerned with deposits and loans from corporations or large businesses. In some places, this distinction between business banks and investment banks does not apply. This system of banking is also differentiated from retail banking, which involves the provision of monetary services directly to consumers. Many banking institutions are known to render both retail banking services and business or commercial banking services.

Business banks are known to offer a wide range of services. These services include: the processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or other means, issuing bank drafts and bank checks, accepting money on term deposit, lending money by overdraft, installment loan, or other means, providing documentary and standby letter of credits, guarantees, performance bonds, securities underwriting commitments, and other forms of off balance sheet exposures. They also offer safekeeping of documents and other items in safe deposit boxes. The sale, distribution or brokerage, with or without advice of insurance, unit trusts and similar financial products as a financial supermarket are part of the functions they provide. Traditionally, they are also known for underwriting bonds, and making markets in currency, interest rates, and credit-related securities. But nowadays, business banks usually have an investment organ that busies themselves with the above mentioned functions.

In the functions of business banks, the giving of loans is a primary issue that benefits both the bank and the individual to whom the loan is granted. This aspect is considered to be much profit oriented. The loans are given with the attachment of interest rates, which is in fact the gain of business banking.

They are granted to individuals with concomitant collateral, which is valued to be worth the amount of money that is granted as a loan. The type of loans that are mainly granted by business banks include: secured loan; that is a loan which the borrower pledges some assets, like a car, house, or other valuables as collateral for the loan. The second is mortgage loan, which is a type of debt instrument used to buy a real estate. The third is unsecured loan, which are monetary loans that are not secured against the borrowers assets, that is, no collateral is involved This form of loan may come from financial institution under the guise of bank overdraft, corporate bonds, credit card debt, credit facilities and personal loans.