The problem is loaning money - it can be only trough the banks, loan sharks, family/friends and investors. Banks of course guard themselves from loss trough collaterals and laws.

Life without banks would be possible, but growth of businesses and speed of living would be much lower. By saying speed of living would be slower I mean that you would have to earn money first then buy something like car or apartment - you would have to save money for years before buying and now you can lend money from bank and buy it in month or two.