Introduction to Finance

alternatives and interest rates currently being paid.
2. Go to the Small Business Administration’s website, http://www.sba.gov. Find inform-
ation about small business lending in the United States and write a brief summary.
3.3
Overview of the Banking System
We now turn our attention to the development of a basic understanding of the current U.S. 
banking system. First we describe the traditional diff erences between commercial banking and 
investment banking and their combination to provide universal banking. Then we cover the 
functions of banks and the banking system.
Commercial, Investment, and Universal Banking
When we refer to banks and the banking system in the United States, we primarily think 
in terms of commercial banking. As previously noted, a 
commercial bank
accepts deposits, 
fi nance companies 
provide 
loans directly to consumers and 
businesses or aid individuals in 
obtaining fi nancing of durable 
goods and homes
mortgage banking fi rms 
originate 
mortgage loans on homes and 
other real property by bringing 
together borrowers and institutional 
investors
Types of Credit Used by Small Businesses
At various times the Fed conducts national surveys of small busi-
ness fi nances. These are nationally representative surveys of small 
businesses designed to gather data on bank and nonbank parti-
cipants in the supplying of credit to small businesses.
Data are gathered on six types of loans—credit lines used, mort-
gage loans, equipment loans, vehicle loans, capital leases, and other 
loans. Data on trade credit and credit card debt are not gathered. Bank 
credit lines used is the single most important source of the six types of 
credit used by small businesses. Lines of credit are bank loans against 
which small businesses can “draw down” or borrow against.