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> The fundamental purpose of bank loans is to enable measured private risk-taking by leveraging a small amount of bank equity (from risk-taking investors) with
by Biologist123 3y ago
> The fundamental purpose of bank loans is to enable measured private risk-taking by leveraging a small amount of bank equity (from risk-taking investors) with a larger amount of risk-adverse deposits. Sometimes the risks are opening a restaurant or buying an apartment building in an up-and-coming neighborhood; here the risk was a crash project to build charitable medical infrastructure during a crisis.
This is central to the author’s defence of the social importance of banks. And if only it were true, banks really don’t finance small businesses in a meaningful way anymore. At least not in the UK.
- rossdavidh 3y agoI have known people in the US who got 5-digit business loans to start their business. Not that they _should_ have been given those loans, mind you; restaurants are a horrifically high-flameout business in the US. But it happens.
- FormerBandmate 3y agoWhere do you think developers get their money?
- patio11 3y agoI sometimes joke that my investors in my first two software companies were Visa and Mastercard (i.e. I was actually loaned money from two large American banks) and by exit they made ~$20k in interest payments. I’m annoyed that signature loans have almost disappeared for small businesses, but the amount of credit extended to small businesses is not small. (Particularly if one does not exclude small real estate businesses from the definition of small business.)
- di4na 3y agoI uh. Check my small rural town high street. Check my small rural town industrial zone and friends that opened factories there. Check my own experience with bank when launching a bootstrapped company Banks definitely do loans for SMB. A lot.