There is a positive relationship between the use o

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Surprising Use of Credit Scoring in Small Business Lending by Community Banks and the Attendant Effects on Credit Availability and Risk

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By Allen N. Berger (au); Adrian M. Cowan (au); W. Scott Frame (au)
Year: 2009
Pages: 23
Binding Paperback

Product Code: 1437928781

Description

There is a positive relationship between the use of credit scoring for small business (SB) loans and SB credit availability. This report employs data from a new survey on the use of credit scoring in SB lending, primarily by community banks. The survey evidence suggests that the use of credit scores in SB lending by community banks is surprisingly widespread. Moreover, the scores employed tend to be the consumer credit scores of the SB owners rather than the more encompassing SB credit scores that include data on the firms as well as on the owners. This empirical analysis suggests that credit scoring is associated with increased SB lending after a learning period, with no material change in the quality of the loan portfolio. Charts ad tables.

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