Glenn and maggie own a regional chain of juice bars and are looking to expand in the coming year. they already have fifty shops, but they know they will need a loan to reach their goal of one hundred twenty five shops. which type of banking institution is most suitable for glenn and maggie’s business?
a credit union

a savings and loan

a commercial bank

an investment bank

The correct answer is, given the definition and functions of the different types of banking institutions given here, C: A commercial bank.

Explanation:

Commercial banks are financial institutions whose functions, among many, are: offering banking services to individuals, groups and companies, to make profit. One of the roles performed by these types of financial institutions is to credit loans to individuals, small businesses, and other groups, and as such, they are the first line to which a small business, such as the one controlled by Glenn and Maggie, would go to, to request a loan to be able to open up their other branches. This bank would give them the loan and allow them to make profit, without having any ties to the banking institution, just as long as they return the investment given to them.

Answer

The correct answer is option C  

A commercial bank will be the most suitable institution to provide the loan to the business of Glenn and Maggie.

Explanation

Commercial banks are the financial institutions which are engaged which accepts deposits, offers accounting services to its consumers, provides various loans and offers other financial products such as Certificate of Deposits. In the above case, Glenn and Maggie should reach to commercial bank to procure loan as they have high scale of operations.

Further Explanation

In the above given question, Glenn and Maggie have already a regional chain of fifty shops and are further aiming to reach the target of hundred shops implying that their scale of operations is large and thus they need loan from the commercial bank instead of credit union.

The commercial loans serve as the purpose of capital for business which the business can utilize to grow and expand their business. The advantage of the loan from the commercial banks is that it has lower rate of interest and it further enables the business to have access to critical funding. These loans can thus be taken from such institutions for a long period which makes it viable for the business to pay their monthly installments. Thus the commercial banks serve the best interest of the business to provide cost-effective capital and further deliver added advantage to such account holders after having approved the business which requires the formality by the business to assess the profitability and the prospects of your business.

Learn More

Learn more about the collateral for loans :  

(Answered by LearnGrow )

Keywords

Lending by financial institutions, loan from commercial banks, capital for business, importance of loans, advantages of commercial banks.

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