Corporate finance and investment banking refer to two financial services offered to businesses and corporations to help them meet goals and manage the financial health of their business. While both services are designed to serve very similar client bases, there is a clear distinction in the tasks involved in each of these two financial services. We highlight those differences in this article.
Corporate Finance and Investment Definitions
Before jumping into what makes corporate finance and investment banking differ, here is a simple definition of each service:
Corporate Finance Definition
Corporate finance is a service offered by financial institutions to help businesses address their short to long-term financial planning needs by implementing various business funding, capital structuring and accounting strategies in order to maximize organizational value and profit.
Investment Banking Definition
Investment banking is a type of banking service that helps companies execute complex financial transactions such as mergers and acquisitions, initial public offerings, bond issuance, etc., in order to raise capital for a business.
Understanding the Difference between Corporate Finance and Investment Banking
Corporate finance services deal with the short to long-term financial needs of a company, offering ongoing financial advisory and management services. Investment banking, on the other hand, is focused on executing single one-off transactions for businesses. Here are two aspects from which to understand the difference between corporate finance and investment banking.
1. Major Differences in Services Offered by Corporate Finance and Investment Banking
| CORPORATE FINANCE | INVESTMENT BANKING |
|---|---|
| Loans | Equity financing |
| Revolving capital | Debt financing |
| Treasury Management | Initial public offerings |
| Foreign trade finance | Mergers & acquisitions |
| Risk Management | Capital markets |
2. Major Differences in Purpose between Corporate Finance and Investment Banking
| CORPORATE FINANCE | INVESTMENT BANKING |
|---|---|
| Day-to-day financial planning and operations for maximum business profit | Capital raising for businesses through equity markets, and debt instruments, as well as the underwriting of financial transactions such as mergers and acquisitions. |
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