There are many people seeking loans from banks for both short and long term financing. They may include individuals, corporations, governments and publicly traded joint-stock companies or other private institutions. At times, the loan may be for consumer goods such as a refrigerator, washer, dryer or it may be for a much larger purpose like buying an automobile or financing a mortgage on a house or farm. If an individual wants to purchase an automobile it means that he must have money on hand. The dealer has the responsibility of seeing that the customer has the ability to pay – by borrowing money, if he does not have cash to make the purchase. If credit is easy, then financing is readily available for borrowers.
On the other hand, if corporations cannot finance their inventories or sales until payment arrives then it is difficult to do business except for cash on delivery. For example, college textbook stores buy millions of dollars’ worth of books every year. They usually pay the textbook company upon arrival of the books. However, if money is not available or if financing is bad then payment is delayed until after income is generated from the sale of the books. Financing is an important part of our economy; without it business on a whole would be slower and at a much lower volume.