Working Paper
Credit scoring and the availability, price, and risk of small business credit
Abstract: The authors examine the economic effects of small business credit scoring (SBCS) and find that it is associated with expanded quantities, higher average prices, and greater risk levels for small business credits under $100,000. These findings are consistent with a net increase in lending to relatively risky ?marginal borrowers? who would otherwise not receive credit, but who would pay relatively high prices when they are funded. The authors also find that 1) bank-specific and industrywide learning curves are important; 2) SBCS effects differ for banks that adhere to ?rules? versus ?discretion? in using the technology; and 3) SBCS effects differ for slightly larger credits.
Keywords: Credit scoring systems; Small business;
Status: Published in Journal of Money, Credit & Banking (April 2005)
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Bibliographic Information
Provider: Federal Reserve Bank of Atlanta
Part of Series: FRB Atlanta Working Paper
Publication Date: 2002
Number: 2002-6