Commercial Bank Agency interactions
The Commercial Bank Agency is the ninth agency in the community. As part of the Economic Bureau, the bank is an integral part of the community’s economic system.
The Commercial Bank funds factoring services that are provided by the Business Operations Agency. It also provides loans to agencies in the third column, enabling these agencies to acquire or develop the necessary resources to serve participants.
The Commercial Bank provides banking services to participants’ businesses. The bank also coordinates with the Community and Capital Banks to build the community storehouse, as well as working with these banking agencies to manage the community’s economy.
IP and resource extraction rights
For easier access by participants, all capital is controlled by the three bank agencies, which enhances their optimal utilization. The Commercial Bank owns all IP and resource extraction rights. IP rights are filed by innovators and developers, and processed by the IP Agency. Once the IP Agency approves the IP, its ownership is assumed by the Commercial Bank, which licenses it to those who want to use it, with the originator reserving the first right of refusal. The originator also earns a fee when the bank licenses the IP to other parties.
The same concept is used when dealing with resource extraction rights. Resources like coal and oil are prospected by limited partners. Once they discover the resource, they are helped to process their claims by the Raw Materials and Transport Agency. The agency works with the participant to ascertain the resource’s economic viability. When it approves the claim, it becomes the property of the Commercial Bank, and in essence, the community. The participant reserves the first right of refusal, as with IP, so that they are considered first in awarding licenses to extract, but others can also extract if the rights’ originator is unwilling to exercise their right.
The community approaches IP and resource extraction rights this way because it considers them to be a form of capital, which should then be easily accessible to all while acknowledging the developer. When IP is easily accessible in the market, developers will be more motivated to develop, knowing their efforts will be richly rewarded, while others with the capacity to use the rights will enable the property to be used efficiently.
Inventory and accounts receivable factoring
The community factors inventory and accounts receivable to enhance the efficiency of the economy and boost businesses’ liquidity. Factoring also enables businesses that can at the moment not afford inventory to do so. Once a business applies for inventory factoring services from the Business Operations Agency, the agency verifies the request, and on approving it, applies for a loan from the Commercial Bank. The bank gives the loan to the agency, which then pays the supplier. The participant who has applied for factoring services organizes for logistics and any other additional costs.
The Commercial Bank can facilitate participants with some of these business costs. It also offers loans for business set-up costs that are not related to inventory. For instance, as a person starts a business, they may need to contract other participants. The bank’s loans are given against the participant’s investment in the community as collateral. The investment continues to pay returns but is charged so that it cannot be transferred or withdrawn until the loan is repaid. The bank can also give loans with a participant’s IP or resource extraction rights as collateral.
The participant who has applied for factoring services sells the inventory and repays the agency, which then repays the loan it had taken from the Commercial Bank. However, if they sell the goods on credit, they apply for factoring services, such that the agency pays the invoice in advance. Similarly, the funds to pay the invoice are obtained from the Commercial Bank in the form of a loan. The participant is responsible for the eventual payment of the invoice, motivating them to perform due diligence before they give goods or services on credit.
In all factoring cases, the Business Operations and Commercial Bank Agencies, and by extension, the community, are indemnified from any losses that may result from factoring. For instance, if a participant orders dead stock that is eventually sold at a loss, they pay for the loss from their personal resources, even having to deduct it from their investment in the community.
Interactions between the Commercial Bank and participants
Much of the Commercial Bank’s services are performed through, or in concert with, other agencies. IPP ownership, factoring, and construction of the community storehouse are among the roles performed by the bank with minimum participants’ input.
In other instances, the Commercial Bank directly interacts with participants, providing essential services as illustrated below.
Illustration 1: mining expert/ prospector
Bob graduated with a bachelor’s degree in Petroleum Engineering from the University of Fairbanks several years ago. He had come to the university from his native Colorado and decided to settle there after graduating, having landed a role as a graduate trainee in a company that specialized in oil prospecting and drilling. Bob worked at the company for 5 years, gaining vital information in prospecting and drilling technologies.
10 years ago, Bob found work with a limited partner who works as a prospector in a community in Anchorage. He soon learned more about the community and decided to join with his family. After satisfying the entry criteria, including starting a prospecting business and netting a few clients, Bob was admitted as a limited partner.
Growth in experience and business skills
During the initial years as a limited partner, Bob was contracted as a consultant in prospecting by limited partners working on mining rights near Anchorage. They would prospect for oil, and file their claims if they discovered it. Many would proceed to mine using these claims, under license from the Commercial Bank. Others would opt not to take up the claims, instead receiving a portion of the license fees that the Commercial Bank charged miners who used the claims.
As he engaged in business, Bob additionally improved his skills. He completed a master’s degree in petroleum and gas engineering and attended several conferences organized both within and outside the community. He has also undertaken several courses in the discipline and is one of the most accomplished professionals in the field. He has been mentored by limited partners in the community, both in professional work and in business management.
As his business has prospered, so has his investment in the community grown. Over the course of his stay, he has managed to invest 5 units of partnership interest. He also has substantial savings and terms deposits and is on course to add a 6th unit soon.
Expanding the business
Bob is confident that he can now expand his business. Instead of being contracted by other limited partners to prospect, he will prospect and develop rights to oil deposits. With his networks, he understands there are substantial oil deposits in Willow, Alaska, which have not been properly developed. He wants to carry out exploration and appraisal of several sites that he has identified.
The first step towards the realization of his dream is preliminary research in the area. With permission from land owners and other relevant parties, Bob carries out a series of studies to identify where to focus his efforts. He conducts seismic surveys in these areas while collecting and analyzing historical data from other prospecting and mining operations in surrounding areas. In addition, he carries out geochemical analysis. These initial tests show there is a high probability of finding oil in the areas he has examined.
Business plan and help from various agencies
Bob also conducts some research to understand the market, including other businesses in the same area. He also uses data analytics to conduct risk-benefit analysis and the viability of his business.
Armed with this data, Bob sets out to draft his business plan. He will need to contract limited contractors with relevant expertise. He uses relevant agencies to shortlist suitable candidates and contacts them so that he has agreements with them in principle, which will be firmed up if his plan is accepted. He will also need to move equipment, leased from the Business Operations Agency, for appraisal drills and other tasks from the mirrored villages in Anchorage to Willow. He will need some inventory, which will be factored by the Business Operations Agency.
Bob will also need refresher training, which is provided by the Raw Materials and Transport Agency at a fee. He will also use the agency’s automated system in developing his claims if he finds the raw material, after which it will be owned by the Commercial Bank Agency.
Implementation and interaction with the Commercial Bank
Bob submits his business plan to the Business Planning Agency. The agency analyses the plan, using different metrics to establish its workability. The agency recommends a few changes, such as the nature of operations, and management of the business. The agency also analyses the business’s ability to raise funds and repayment plans.
The agency approves the plan, opening the way for Bob to lease equipment. He signs up the limited partners he needs to do his business and files the agreements with the Stewardship Agency. Since he does not have the necessary cash to set up operations, he applies for a loan from the Commercial Bank.
The Commercial Bank looks into Bob’s profit and loss projections, to calculate his ability to pay. The agency has extensive information at its disposal, including related businesses’ track records, Bob’s business history, and the community’s economy at present. investment in the community, and is satisfied that the loan applied for will easily be covered by the investment if he is unable to pay.
The bank grants the needed loan. It charges a few of Bob’s units of investment that cover the loan plus interest. As he starts prospecting, he closely works with the Raw Material and Transport Agency for technical assistance. The agency may from time to time recommend consultants to improve the process.
Once Bob has discovered oil in an area, the Raw Material and Transport Agency will approve the claim. The claim will then be appraised and valued by the Commercial Bank. Bob can use the claim to apply for loans in the future if he needs to do so.
Illustration 2: storehouse
Reuben and Sally have been in the community for many years. They have managed to succeed in their marriage and business and have built a comfortable life for their family. Reuben is a baker, while Sally is a chef. Their son, Jeff, helps his father in the baking business, but he intends to be an event organizer in the future.
Over time, Reuben and Sally have developed a taste for opera music. Reuben is particularly fond of Humperdinck, whom he has followed since he was a young man. It was at one of these performances that he met his future wife.
While Sally respects Humperdinck, her favorite is Wagner. She has attended virtually every performance that has any relationship with Wagner. Usually, he will drag along Reuben to finally demonstrate to him that Wagner is the finest composer to grace the planet. These performances happen in the community’s opera house. The opera house, built and managed by the Commercial Bank Agency, is part of the storehouse. It handles performances every other week, and more during special occasions.
Jeff, their son, has no time for the opera, however. He does not understand all the fuss that his parents have about classical music. He, however, adores a local musician, who is due to have a concert in the community. The musician is a teenage sensation.
While Jeff believes he is the greatest musician alive right now, very few people outside his age group share his opinion. Ticket sales have not been as high as he thought. The concert, therefore, will be held in the concert hall, and not the stadium as Jeff had anticipated. This concert hall is also part of the storehouse, owned by the Commercial Bank Agency, and managed by Recreation and Arts Agency through contractors.
Sally needs fresh vegetables for her deli daily. While she keeps two days’ worth of stock, she goes to the farmers’ market every day. She loves the farmers’ market due to the variety, the freshness of produce, and the price. Since all vegetables are sourced within the community, they are cheaper, with no food miles as part of the cost.
As an avid soccer fan, Jeff regularly attends matches in the community stadium. The stadium is regularly used by the community team, for which Jeff has attended trials, but has not succeeded in making the first team or the reserves. This failure has not dampened his love for the game. This stadium, likewise, is owned by the Commercial Bank. The bank does not however manage it. This is the job of the Recreation and Arts Agency, which hires contractors to run it.
In the future, if Jeff’s idol succeeds in getting more fans, he will have his concerts in the stadium, which, since it is much bigger, costs more to hire. In addition to soccer matches, the stadium can host NFL, rugby, and even hockey matches, with slight modifications built into the pitch and stands.
Other functions of the agency
The Commercial Bank Agency collaborates with the Community and Capital Banks to build the community storehouse. The Capital Bank provides the capital with which the Community and Commercial Bank give themselves loans to finance the construction. The Commercial Bank constructs shopping centers that are situated in between the recreational and arts centers. These centers are located at each of the four corners of the storehouse. The Commercial Bank also constructs the farmers’ market.
Each bank manages the assets that it develops. The Commercial Bank contracts limited partners, known as hosts, whose business is maintaining the facilities, and renting out space. The bank, which receives the rent, pays the host a percentage of the rent income, sets aside some for repairs and periodic extensive maintenance, and uses the rest to repay its loans. After the loan is repaid, it can use the income to offer better services, reduce rent, and pay a higher return on investment to the Capital Bank.
Besides providing opportunities for participants to engage in recreation and arts, the Recreation and Arts Agency also insures community assets that are owned and managed by various agencies. The premiums it charges for this service are deposited in the Commercial Bank as an investment. The Commercial Bank pays the Recreation and Arts Agency an annuity (interest on its investment), which the agency uses for its running costs and investment to provide better services.