Small Banks are not the best option for Loans

A recent study from Harvard Business School shows that local banks are not always the best option for loans, especially for small business.

The majority of small business owner goes to a small bank to obtain a loan thinking that this will be the only option, due to the bank’s lending structure, which gives the branch managers authorization over all lending decisions. Branch managers abuse their power by approving small loans at very high interest rates. If the small bank is located at a small town, the manager gives companies the worse conditions of lending since the companies do not have any other option, in other words, the bank is a monopoly in the town.  However, if there is competition in town, the managers have the authority to operate in different ways so the competitors from large banks will not be able to due to the corporation’s policies.

The study also states that the small business loans have increased due to the nonexistence of small banks local monopolies and the increase of bank competition. Therefore, in order to help owners of small business, banks should concentrate in creating competition and a variety of lending models for small business.

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About J&B Professional Cleaning Service
Specialing in all types of Janitorial, Construction and Remodeling Clean-Ups

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