Question 15(Multiple Choice Worth 4 points)
(06.04 HC)
Which of the following scenarios would be most likely to cause a small bank to be more willing to loan money to small businesses in a community?
O The business has failed previously.
The bank can make a profit on the loan.
O The customer has no money in savings.
O The community cannot grow from the loan.



Answer :

In order for a small bank to be more willing to loan money to small businesses in a community, the scenario where the bank can make a profit on the loan would be the most likely cause. This is because banks are profit-driven institutions and they assess the risk associated with lending money to businesses. If the bank believes that by providing a loan to a small business, they can earn interest and fees that exceed the potential risks, they would be more inclined to lend the money. Here's why the other scenarios would not be as likely to make a small bank more willing to loan money: 1. If the business has failed previously, it indicates a higher risk of default on the loan, making the bank less likely to lend money. 2. If the customer has no money in savings, it may suggest financial instability or a lack of collateral to secure the loan, making the bank hesitant to lend. 3. If the community cannot grow from the loan, it does not directly impact the bank's decision to lend money based on profit potential. Therefore, the scenario where the bank can make a profit on the loan is the most compelling reason for a small bank to be more willing to loan money to small businesses in a community.