why do Bank hesitate to lend money to small scale industries

Dear student,

Banks might not be willing to lend money to small scale industries because small businesses are usually too new to have created a favorable credit history.
​​​​​In such cases, banks do not have a guarantee as to whether or not the loans will be repaid by the persons concerned. It has to be understood that banks only mediate between those who have surplus money and those who need money. Banks, in fact, borrow the money deposited with them and lend it out to persons requiring money. They would thus be unwilling to advance the money to individuals from whom repayment is uncertain.

Regards,