Question

As a newly appointed member of a Board of Directors, from a newly launched Community Bank where many widows and orphans have their life savings invested. Your asked if the bank should consider expanding into small buisness lending. Explain in three paragraphs what some of the concerns are as well as some of the benefits to the community and bank may be if they enter into the lending buisness

Answer 1

Expanding into small business lending can have positive impacts on both the community and the bank's financial performance, despite the risks involved.

Step-by-step explanation:

One concern for the newly launched Community Bank in expanding into small business lending would be the increased risk associated with lending to businesses. Small businesses can be risky borrowers due to their limited financial resources, lack of established credit history, and higher rate of business failure compared to larger businesses.

However, there are several benefits for the community and the bank in entering the small business lending business. By providing loans to small businesses, the bank can help stimulate local economic growth by supporting entrepreneurship and job creation. This can lead to an increase in the overall prosperity of the community. Additionally, small business lending can be a profitable endeavor for the bank, as it can generate interest income and attract new customers.

Overall, while there are risks involved, expanding into small business lending can have positive impacts on both the community and the bank's financial performance.