Understanding Sponsor Financing: Why a Sponsor Bank May Be The Right Option For You
Reviewed by Matthew Brunson, SVP of Strategic Partnerships at TAB Bank
A sponsor bank is a financial institution that provides a broad range of services to businesses and organizations. It acts as a conduit between the customer and the banking system. By supplying access to banking services and products, sponsor banks give a client organization the ability to meet its financial goals, providing a safe and secure option for the business to manage funds. This is made possible through sponsor financing.
What is Sponsor Financing?
Sponsor financing is an increasingly popular option for businesses looking to receive capital or other finance-related support. By working with a sponsor banking partner, organizations can receive an influx of funding without necessarily going through the traditional banking-loan route. Through sponsor financing, a business instead partners with an investor (such as a sponsor bank) who provides supplemental capital and money movement and compliance oversight to help the organization meet its financial needs.
Typically, sponsor banks are state or federally chartered, meaning that they are members of established credit card associations. This allows them to license credit cards and process credit transactions for their partners. As part of the sponsor-financing service, the bank will assume responsibility for ensuring that its clients adhere to regulatory compliance standards.
Who is the Sponsor?
In general terms, a sponsor can be any individual or entity that provides support for a person or organization. In business, the term sponsor is sometimes used synonymously with investors, as both are invested in the success of the sponsored party. That said, sponsors can go further than simply providing capital; sponsors may underwrite mutual fund shares, promote publicly traded securities, advocate for a brand, or otherwise help advance the goals of their partner.
More specifically for sponsor financing, a sponsor is an organization (generally a sponsor bank) that offers financial services to non-financial companies.
Examples of Sponsor Financing
Given the range of support and investment options available, sponsor financing can take many different forms. In the broadest sense, sponsor financing encompasses any kind of monetary backing provided to either an organization or an individual customer. This can include providing startup capital, underwriting mutual fund shares for public offerings, issuing investment funds for trade on the stock exchange (exchange-traded funds or ETC), and more. But perhaps the most important form of sponsor financing for many organizations is in providing money-movement services.
Money movement describes services that involve the transfer of digital funds from one account to another. This includes direct deposit, P2P transactions, accounts payable capabilities, disbursement to vendors or sub-merchants, and otherwise facilitating card payments.
Sponsor Financing with TAB Bank
Whether you’re an organization looking for additional support or an individual who could benefit from better banking services, TAB Bank is ready and available to help. With 25 years of experience as one of the first branchless banking solutions in the United States, TAB is committed to helping you achieve your financial goals.
TAB Bank sponsorship programs include access to major credit-card networks, as well as co-branded programs, private label programs, and commercial and consumer programs. Reliable, resourceful, and capable, TAB Bank is here to help you build a strategic, TAB Bank sponsorship programs include access to major credit-card networks, as well as co-branded programs, private label programs, and other commercial relationships. Reliable, resourceful, and capable, TAB Bank is here to help you build a strategic, mutually beneficial partnership. Learn more about becoming a TAB Bank partner, and find the flexible sponsorship options to meet your unique needs. Whether you’re an established enterprise, a burgeoning startup, or anything in between, we can provide the resources to help you reach success.
Ready to get started? Take the next step by contacting us today!