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mestny [16]
1 year ago
8

Where do financial institutions get the funds that they lend to customers?

Business
1 answer:
Anon25 [30]1 year ago
3 0

Banks typically generate income by borrowing funds from depositors and paying them back at a predetermined interest rate. By charging the borrowers a higher interest rate and making money off the interest rate spread, the banks will lend the money to borrowers.

Banks obtain savings from individuals and companies (savers) and use these resources to issue loans to others who need money (borrowers). One of the biggest funding expenses for banks is the interest they must pay on the money they receive from savers.

Finance companies make money by selling securities, primarily commercial paper, to other companies, including banks, in the money market. They then lend the money to people or corporations at an interest rate that is higher than what they pay on their securities.

To learn more about Banks

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