why do banks hesitate to lend money to small scale industries
The baks hesitate to lend money to small scale industries because of the following reasons:
1. Less profit on smaller Loans
Banks prefer giving loans to large business as the return on loans given to large businesses is much higher than return from loans to small scale industries. Small scale industries generally asks for small business loans and it does not make financial sense to the Banks.
2. Lack of Collateral
Banks give loan on collateral which ensures or it acts as a guarantee that their loan will be repaid. Small Scale Industries do not have such valuable asset which they can give as collateral so banks hesitate to give loans without collateral.
3. Lack of credit history
Banks check the credit worthiness before giving loans. In case of small scale industries it becomes a challenge for them to create a favourable credit history.
Regards
1. Less profit on smaller Loans
Banks prefer giving loans to large business as the return on loans given to large businesses is much higher than return from loans to small scale industries. Small scale industries generally asks for small business loans and it does not make financial sense to the Banks.
2. Lack of Collateral
Banks give loan on collateral which ensures or it acts as a guarantee that their loan will be repaid. Small Scale Industries do not have such valuable asset which they can give as collateral so banks hesitate to give loans without collateral.
3. Lack of credit history
Banks check the credit worthiness before giving loans. In case of small scale industries it becomes a challenge for them to create a favourable credit history.
Regards