Business Loans at Large Commercial Banks: Policies and Practices
Last Updated: 11/08/79
Commercial bank lending was once a fairly simple business. Business loans were nearly all short term and carried fixed interest rates. Any other details, except possibly collateral requirements, were left to informal agreements between a bank and its customers. Business lending began getting more complex in the 1930s as many banks started making term loans—loans with maturities of more than a year. Relations between banks and business borrowers have been growing more complex—and more formal—ever since, the formality of term loans now being applied to many short-term loans as well.