Financial Institution Loans
Financial Institution Loans
Banks, credit unions, and other lenders—especially those with more than $300 million in assets—sometimes make loans to other financial institutions. Typically, the amount of these loans is a relatively small percentage (less than 5%) of the lender’s loan portfolio. The need for these loans varies from community to community and from region to region.
Things To Know
- Financial institutions make loans to support a region’s economic vitality.
- Lenders can enhance their impact on new business growth.
Why do they make institutional loans?
Lenders make loans to financial institutions for some of the same reasons they make loans to consumers, farmers, businesses, and other borrowers. They make loans to support their communities with an adequate supply of funding for consumption and investment activities and to promote the region’s economic vitality. Lenders are interested in loaning funds to other financial institutions because they will receive interest payments, and the risks associated with lending to another financial institution are generally lower than lending to consumers and small businesses.
By supporting other financial institutions in the area, lenders increase their positive impact on new business growth, job creation, and other components of a strong economy.
Lenders may also make loans to finance companies, insurance companies, and savings and loan institutions.
