The assumption is that people will keep most of their money in the bank and only withdraw small amounts at a time. Banks are often permitted to loan the same deposits 10 times. For every dollar in deposits, they can lend $10. That's a good deal for the bank. They get to make the loan interest ten times for every dollar on deposit.
Instead of giving my company credit for the appraised value of the land against the borrower contribution, we were given $220,000 credit, not $360,000. This means that we had to write a check for $180,000 before the bank would fund the loan. The $180,000 is sitting in the bank's account as a deposit. We just gave the bank the ability to write $1,800,000 in loans against that $180,000 deposit.
Did I just fund my own loan? What do you think?