Why is commercial lending declining in importance in the United States? What effect does this...

Question:

Why is commercial lending declining in importance in the United States?

What effect does this decline have on overall commercial lending activities?

Commercial loan:

The commercial loans refer to the loan taken by the corporate sector from the financial institution to fulfill the fund requirement of the operational cost or capital expenditure, which the company to unable to manage by itself.

Answer and Explanation:

The commercial lending is declining its importance in the United States because there is an increase in the number of substitutes or non-banking institutes to provide loans like commercial paper that provides provide short term loans at a lower rate as compared to banks.

The decline in the commercial lending activities leads the bank with small borrowings, and hence it is riskier as it makes the monitoring and the credit estimate of the loans very difficult.


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Sources of Long-Term Financing

from Business 100: Intro to Business

Chapter 23 / Lesson 4
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