§ 18271 Loan Limits For Industrial Lenders

• •A company that lends money can't lend too much to one person. The most they can lend is 20% of the company's money that's not being used for dividends.
• •If the loan isn't backed by something valuable (like a house or car), the company can only lend up to 5% of their money to one person.
• •These rules help make sure the company doesn't lose too much money if one person can't pay them back.

Imagine a small bank has $1,000,000 in savings that they aren't using for dividends.

The bank can lend up to $200,000 (which is 20% of $1,000,000) to one person if the loan is backed by something like a house. But if the loan isn't backed by anything, the bank can only lend up to $50,000 (which is 5% of $1,000,000) to that person.