8.1.2 Raising finance: banks

Concerning financing innovation there are two different kinds of banks: investments banks and retail ones.

  • An investment bank is a company that acts as a backer or agent and serves as a liaison between an issuer of shares or bonds and the investing public. The investment banker, can be either a manager or a member of an investment banking association, makes direct purchases of new securities from the issuer and distributes them to dealers and investors, profiting from the spread between the purchase price and the selling one. Investment bankers may be involved as advisers or intermediaries when a company decides a stock exchange flotation.
  • A retail bank, on the other hand, is the type of bank found in all towns, provides general banking services to the general public and to businesses, including loans, savings accounts, financial services etc.

Investment banks are not normally concerned with the earliest stages of development and retail banks provide services to the public in general and give credit to new companies and entrepreneurs.1

1 The chapter is based on Gate2Growth. A guide to financing innovation. European Communities 2002.