NEWSRELEASE
For Release: November 16, 2006 Credit Scoring Can Increase Access To Credit
WASHINGTON, D.C. – The introduction of credit scoring by banks for small
business loans may help increase small businesses’ access to credit, according
to a study released today by the Office of Advocacy of the U.S. Small Business
Administration. The report also found that relationships continue to be the
dominant factor in banks’ decisions to lend to small businesses. ### The Office of Advocacy of the U.S. Small Business Administration (SBA) is an
independent voice for small business within the federal government. The
presidentially appointed Chief Counsel for Advocacy advances the views,
concerns, and interests of small business before Congress, the White House,
federal agencies, federal courts, and state policy makers. For more information,
visit www.sba.gov/advo, or call (202)
205-6533.
Contact: John McDowell, (202) 205-6941
john.mcdowell@sba.gov
SBA Number: 06-21 ADVO
Press Kit
For Small Business
“The report documents how the use of credit scoring can lead to risk-based
pricing of loans which ‘democratizes’ lending, meaning that riskier loans can
now be made to start-ups or small business owners with little credit history,”
said Dr. Chad Moutray, Chief Economist for the Office of Advocacy.
Written by Drs. Charles and Adrian Cowan with funding from the Office of
Advocacy, A Survey Based Assessment of Financial Institution Use of Credit
Scoring for Small Business Lending, shows that banks, particularly those in
urban areas, are moving towards the use of both owner and business credit
scoring as a key metric in the small business loan decision.
For banks that have adopted credit scoring, it appears that there are
significant increases in the importance of small business and micro business
loans in the total lending portfolio subsequent to the use of credit scoring in
the lending decision. Nonetheless, the use of credit scoring is not universal
with about 47 percent of banks surveyed using some form of credit scoring for
small business lending.
The Office of Advocacy, the “small business watchdog” of the federal government,
examines the role and status of small business in the economy and independently
represents the views of small business to federal agencies, Congress, and the
President. It is the source for small business statistics presented in
user-friendly formats, and it funds research into small business issues.
For more information and a complete copy of the report, visit the Office of
Advocacy website at www.sba.gov/advo.