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> It is up to the business owner to take out loans and allocate those resources responsibly. Isn't it up to the bank to allocate its resources responsibly?
by lumisota 9y ago
> It is up to the business owner to take out loans and allocate those resources responsibly.
Isn't it up to the bank to allocate its resources responsibly?
- yeahsure 9y agoAny business will fail unless it allocates its resources responsibly. If banks don't, they'll go out of business (or get bailed out, but that's a different topic), if small businesses allocate money irresponsibly, they'll go out of business. With or without a loan.
- rossdavidh 9y agoThe priorities are different, though. The bank wants to maximize the amount of money that gets paid to them, you want to maximize the amount of money that gets paid to you. While the bank doesn't want you to go under, they also aren't necessarily thinking in your best interest either; getting your loan paid off and never needing another one is almost as bad a result for them as if you went under. This doesn't mean they're bad people, just that the incentives, while not fundamentally incompatible, are also not fully aligned.