An article in the Wall Street Journal following the failure of Silicon Valley Bank observed that “banks need deposits to make loans; if deposits fall, lending is almost sure to follow.” The article also noted that “when the local bank disappears, people and businesses in their communities often find credit goes away too.”

a. Explain why banks need deposits to make loans.

b. Are small businesses more likely to rely on banks for funding than would large corporations? Briefly explain.

c. Briefly explain why a small business might have more success obtaining a loan from a local community bank than from a national bank.