Can banks decline, or limit the amount of a loan to a business, because of the type of business? ( Used Car Dealer)Can banks decline, or limit the amount of a loan to a business, because of the...

Can banks decline, or limit the amount of a loan to a business, because of the type of business? ( Used Car Dealer)

Can banks decline, or limit the amount of a loan to a business, because of the type of business? ( Used Car Dealer)

Asked on by batts

4 Answers | Add Yours

jdoarsinkfield's profile pic

jdoarsinkfield | (Level 1) Adjunct Educator

Posted on

A bank can not only decline or limit the amount of a loan to a business at any time, regardless of the business but can also cut existing credit lines, etc based on the economy and their own prognostications of how your business will do in the coming quarter, year, etc.  Banks are businesses too and they need to stay afloat and they have to balance the security of their deposits against their capacity to make sure they can pay interest and cover overhead based on their perception of the risk of a loan in a given industry at a given time in the economy.

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

It is not clear from your answer where you are, so I don't know for sure about the laws of the place you live.

At least in the United States, there are no rules about who a bank must lend to.  I should actually say that there are no rules with the exception of rules about things like racial discrimination.

In terms of what sort of businesses a bank lends to, there are no rules.  Banks are free to lends as little or as much as they like, depending on what they think the risks and rewards of lending are.

The government doesn't have a lot of say in how banks lend their money.  You can see that in current events.  The government wants banks to lend more to small businesses, but the banks do not want to and have not been lending as much as the government wants.

 

mamalion13's profile pic

mamalion13 | Student, Grade 9 | eNotes Newbie

Posted on

The bank of Taiwan would never decline a loan to a realiable  used car dealer does not matter.

 Should you please answer the same question ASAP?

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

Yes, banks can decline loan, and limit the amount of loans to businesses of certain types. Individual banks can and do formulate their policies regarding the types of borrowers and the purpose for which they will advance loan. They also lay down guidelines on the limit of maximum loan they will advance.Limits prescribed in these guidelines can vary from one type of business to another

In addition to business policies of individual banks, government or some other agency of government, like Reserve Bank of India, lay down guidelines regarding these matters which all scheduled banks are obliged to follow.

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