Commercial Bank Agency interactions

11 min read

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: Starting a new school

Around 15 years ago, Nancy found work as a teacher in the nearby community. At first, she worked for a limited partner who was a principal in one of the first schools in the community. The limited partner mentored Nancy as she negotiated her way. After a few years of working with the principal, she was admitted into the community, where she continued her business as a teacher, being contracted by the principal.

Once a limited partner, Nancy soon signed agreements with other principals who had also established schools. She would handle up to 5 lessons per day, and would occasionally teach lessons in other communities.

At the same time, Nancy. Would frequently help the limited partner who had initially recruited her to assist her in drawing up timetables. She was involved extensively in curriculum development, especially integrating technology in education. She was also occasionally contracted by the Life Planning Agency to help in drawing up curriculum guidelines. These and other tasks that she assisted in have provided her with valuable hands-on experience in running a school.

Starting a school

She is now an accomplished teacher and eager manager, having not only taught for several years in community settings but also improved her skills through a post-graduate degree and various trainings offered by the Life Planning Agency. She has also taken part in various programs that aim to teach business management and provide quality education.

She is ready to start her school. She researches to see the viability of such a business and is convinced it is the right thing to do. She writes a business plan, outlining her business and marketing strategies.

Business plan

In her business plan, Nancy intends to start a high school that will have a strong emphasis on new and emerging technologies, allowing students to learn about them before they specialize in technology or other fields. The school will also have the stated aim of ensuring all students have a basic grounding in technology, regardless of their career aspirations. She contends that none of the other schools currently have such an approach.

 Different agencies critically appraise her business plan to determine its viability. They consider the presence of other schools, the attitudes of the community regarding what Nancy wants to teach, and the availability of teachers to offer the sort of curriculum she intends to implement. They also look at Nancy’s readiness to be a school owner, examining her previous experience, reviews from previous engagements, and her educational background. They also look into her finances and net worth, to see whether she can comfortably shoulder the responsibilities of running the school, including her ability to repay any loans she might need.

If the agencies are convinced that she has a good plan and that she is capable of implementing it, they approve it. The agencies act independently. Among these agencies, there are Business Planning, which helps in drafting the plan, Life Planning, which handles education, and Stewardship, which works to maintain an equilibrium in the supply and demand of goods and services.

Setting up the school

Under her plan, she will lease space in her district building. She will engage teachers who are limited partners. In the future, she proposes to additionally contract teachers who have not yet joined the community.

To attract teachers who are currently contracted to teach in other schools, Nancy employs a number of tactics. She offers a higher share of fees to teachers and facilitates most of their operations so that their major preoccupation is teaching. She also provides them with an opportunity to tailor lessons and curriculum to their preferences, only working within a framework meant to maintain quality and community education standards.

Each teacher will however need to facilitate some aspects of their business operations, including leasing the needed equipment from the Business Operations Agency. Teachers will directly be paid by their students, with the principal earning 20% per student. Each student will pay per lesson. At the start of a lesson, funds will be transferred from the student or their guardian’s account, and placed in an escrow account. Once the lesson is over, the money will be transferred to the teacher and the principal.

Her prospective students are all attached to other schools at the moment. She needs to make a powerful pitch to lure them to her business. The foremost card she plays is the dynamic nature of the curriculum she is offering. She demonstrates to students that the teachers she has contracted are highly skilled in the subjects she offers and that the students will engage in highly interactive discourses with these teachers, rather than undergoing one-sided lectures.

Nancy also does a detailed breakdown of the fees the school will charge. While significantly higher than in many of the current schools, the amount and quality of material covered is more and therefore represents a significant discount. The content also primes students to start a business early, so that they are well-placed to become limited partners by their 18th birthday, and if all goes according to plan, as early as their 16th birthday.

Assistance from Commercial Bank and other agencies

Nancy needs extensive space to run her school. She does not have the money needed for the rent at the moment. She also needs to secure desks, chairs, and learning materials such as textbooks. All these items are leased, with equipment coming from the Business Operations Agency, while the Data and Publishing Agency will provide books. Students will buy exercise books and pens, and any other learning materials from the school. As part of her inventory, it will be factored by the Business Operations Agency, with the Commercial Bank providing the necessary loans.

Nancy applies for a loan from the Commercial Bank to help with initial expenses – logistics of bringing in the needed equipment and resources and rent. She needs to recruit teachers, though while she will be relying on the Stewardship’s automated system, it is still an expensive undertaking. She also needs to run an aggressive marketing campaign to popularize her school. The bank gives her a loan and charges some units of her partnership interest.

Nancy and the teachers who teach at her school operate business accounts with the Commercial Bank. The bank effects instructions on how to transfer funds as per agreements between the various limited partners. The Commercial Bank also facilitates the escrow accounts that are needed for payment of fees, and in this instance, works with the Community Bank when funds need to be deducted from a student’s personal account.

Illustration 2: 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.

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.