Banks may prefer to lend to larger corporations compared to SMEs for several reasons:
Lower Risk: Larger corporations are generally more established and have a proven track record of generating revenue and profits, which makes them less risky for banks to lend to. SMEs, on the other hand, may be perceived as riskier due to their smaller size and less established financial history.Higher Creditworthiness: Larger corporations tend to have stronger credit profiles, which makes them more attractive to banks. They may have higher credit ratings, better cash flow, and more assets that can be used as collateral for loans.Larger Loan Size: Larger corporations may require larger loans, which can be more profitable for banks. SMEs may only require smaller loans, which may not be as lucrative for banks in terms of interest income and fees.Relationships: Banks may have established relationships with larger corporations, which can make it easier to underwrite loans and provide additional financial services. SMEs, on the other hand, may not have as established relationships with banks, making it more difficult for banks to assess creditworthiness and provide financial services.
Overall, banks may prefer to lend to larger corporations due to lower risk, higher creditworthiness, larger loan size, and established relationships. However, many banks also recognize the importance of supporting SMEs and may have specialized lending programs and services tailored to the unique needs of small businesses.