Our world is driven by capitalism. You need only walk down any high street or through any mall to see just how much our culture is driven by money. And we aren’t saying that is a bad thing. Sure, capitalism has its issues. But so does any societal system.

Capitalism has many benefits for both our culture as a whole and on the individual level as well. But our society only functions as it does because of the key building block holding everything together. The Banks.

Love them or hate them, Banks are everywhere. Every mall, every high street. Every metropolitan cityscape or small-town village. Nowhere is safe from the spread of banks. And a common question we get asked is this: How do banks make their money?

 

Understanding Banks

It is easy to think that banks seem to function without actually making money. They simply store your money and move it around. So how do they pay their staff, afford rent and upkeep? And how is it profitable for anyone to become a banker?

We have spoken to a few experts, such as those at blutin and at Smythes to better understand exactly how banks turn a profit. We are going to break it down for you in simple terms.

 

Loans

This is the key moneymaker for any bank. Loans. Anyone can walk into a bank and apply for a loan. Of course, you need to get the bank’s approval with a solid reason for the loan. And the bank will want to be sure you can pay it back.

All banks will have an interest rate attached to the loan. This is unavoidable. This is how they make money. Say you take out a loan for $100. With interest you could end up paying back $120 to the bank eventually, making a nice $20 profit for the bank.

Now imagine that on a scale of thousands of dollars interest per day. A bank only brings in as much money as they are willing to lend out.

 

Investing

While a physical bank is often designed to store and manage your money, the companies that own the bank will have their hands in many different avenues. Investments and stocks are one area these companies love to dabble in. And where do they get the money?

From you. When you store your money with a bank, you are giving them permission to spend it. Relax, they don’t actually spend your physical cash. While it is in their care, they will use it to invest and bring in profit. This profit is returned to you as interest. The more money you leave with a bank, the more interest it accrues. It’s a win-win situation and a great way for both the bank and you to profit.

 

Mortgages

Mortgages are just very specific loans. They are for buying property exclusively and follow different repayment rules to a traditional loan. The reason for this is due to the size of the money being borrowed and the nature of the investment. Since you will be living in your purchase, the bank is sure you aren’t doing a runner with the money, so the repayment scheme isn’t as taxing (although it is still noticeable) and like a normal loan, the bank profits off a mortgage in the form of interest on your repayments. And, if you can’t pay up, they can simply take the property and sell it for profit as well.

We hope this has highlighted how banks make their money in a helpful and insightful manner.

Starting a Drop Shipping Business is a great way to invest in your future. It is a modern way of bringing in income and flexing your business mind. Below is a brief guide to getting started in the world of Drop Shipping.

Select a Product

The great thing about Drop Shipping is you never have to handle the product yourself. You are simply working as the middleman allowing customers to purchase products directly from the wholesaler.

To this end, your first move is to decide what you will be selling and from where. For example, if you were looking to sell customized silicone wristbands you might look at partnering yourself with a company like SleekWristbands.com.

Once you’ve decided on what you will be selling you simply have to get the wholesaler on board and get things set up and you are on your way.

Website / App

You’ve selected your product. The next step will be to create a functioning website that will allow customers to place their order. Creating a working app will also help. The key is to make sure both these things are functional and easy to navigate. Don’t be afraid to sink some money into getting a professionally made website. The better your site or app, the more likely you are to get orders.

Your website or app will be the face of your company, so make sure it is showing off what you are all about. Spending time and money to make this perfect will pay off in the end.

Marketing

You’ve got your product and a working system that your customers can place their orders with. Now the big part. Marketing. This is the part you will want to really dedicate your time to. And it is something that you won’t stop doing the whole time you are running this business.

The first thing is to find out what your target audience is. You need to know what age demographic you are aiming for. What type of people within that age range is going to be buying this product as well? This will greatly influence how you market.

The second thing is to decide how you will be marketing. Do some research into what marketing methods work best for your target demographic. And then see how you can go about using those methods to your advantage. If you are using social media, look into how to create posts that will get more views. If it is a print advert, look into investing some money into getting a professional-looking advert made.

Keeping on top of your funds.

Make sure you are keeping on top of your income and expenses. Mainly so you aren’t getting ahead of your self but also for tax purposes. While it may not seem like an ordinary company you will still need to conform to the normal business practices when it comes to taxes.

Knowing how much income you are making will also allow you to reinvest into the company.