Industrial banks are non-traditional banks that offer non-traditional loans to non-traditional borrowers...and if that isn’t the clearest definition ever, we just don’t know what is.
Eh, okay. In order to explain it better, though, we’re going to need to hop into this our DeLorean and transport ourselves back to 1910 America.
During those dark days, it was pretty much impossible to get a bank loan for anything unless you were an upper-class type with a bunch of collateral. So...pretty much the opposite of the person who might most need a loan.
Enter Arthur Morris, the founder of the first so-called Morris Plan bank in 1910. This bank offered loans to working-class folks who maybe didn’t have a huge pile of money or a mansion to offer as collateral. In fact, instead of collateral, Morris Plan banks wanted character references: if the others thought we were a good person, then the bank would likely offer us the loan we needed. It was a good deal, and the popularity of these banks and bank plans spread like wildfire.
Traditional banks eventually realized they were being stupid and missing out on a whole bunch of potential customers. That realization, plus the Great Depression, plus enhanced banking regulations, led to the eventual morphing of Morris Plan banks into what we now call “industrial banks.” They serve kind of the same purpose—they offer loans to folks who maybe can’t or don’t want to go through traditional banking channels—but they’ve become a bit more specialized.
For example, the car dealership down the road that offers in-house financing to its customers is an example of an industrial bank: it might have lower barriers to entry for borrowers, and they might end up getting a better deal on the loan than they would have through their everyday bank.
Example #2: an industrial bank might be set up to loan money to folks within a specific industry...like, say, teaching or welding. They might focus on smaller loans that people in those working-class industries might not otherwise be able to secure.
“Boy,” we might be saying, “is there anything industrial banks can’t do?”
And the answer to that is yes, there sure is. While they can accept deposits, they can’t offer checking accounts, for example. They’re not that kind of bank. They also can’t be chartered just anywhere they please; there are only a handful of states that actually allow industrial banks to call them home. (Utah is the most popular state for industrial bank chartering.) And they typically can’t guarantee the loans themselves, so they contract with a third-party guarantor who can. But despite their limitations, they can still offer quite a bit of financial lending goodness to people who might need it most.
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Finance: What is a Merchant Account?4 Views
Finance allah shmoop What is a merchant account All right
You sell earrings at the mall hearings for years and
you know other regions private ones You're a merchant You
take credit cards visa amex mastercard A customer pays for
her ear ring with a visa card charge for three
hundred bucks Alright Well where does that money go How
does it get there Well because you pierce on earth
have a merchant account you take her little mag strip
thing Me on her card with all our information has
everything on it like her name bank number address phone
a whole bunch of other codes on it You swipe
it in your little reader and voila Three hundred boxes
taken from her account with visa taking about five bucks
of this transaction for the pleasure or pain of doing
it And then visa room it's two hundred ninety five
dollars into your bank of america merchant account that's How
you got paid So who gets a merchant account Do
you need a fundamental genetic resistance teo Kryptonite to be
granted such lofty status No not at all Generally speaking
all you need is a few grand in a basic
bank account Reasonable credit scores like above six hundred ish
And you have to be willing to fork over some
minimum initial amount as well as minimum monthly amount So
it's still worth it for the credit card companies and
banks to continue to be in business with you like
there's A basic monthly fee for most of them Well
how do you lose your merchant account status Well you
offer lousy product to your customers who demand their money
back through charge cards in what's called a charged back
like they dispute the charge and make the credit card
company go after you for the refund And that then
violates some minimum few percent floor from a credit card
taking perspective and well then visa mastercard amex will They
could just stop issuing you a credit taken stopped taking
customers cards from you and then you have to only
take cash You're screwed But as long as you follow
the rules pay your bills and continue to attract creative
people who want piercings in you know interesting places like
the mall Then you'll remain in business for a long
as you want more or less and well so that's
It You're one of the few the proud the merchants
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