November 16 , 2006

Credit Scoring Can Increase Access To Credit For Small Businesses

Washington, DC - 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 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.

Analytic Focus LLC is a Birmingham based research and consulting firm with decades of practical experience in analysis, research methods, and financial models. Our partners are highly skilled statisticians and financial economists with academic, industry, regulatory and testifying experience. Our focus is on providing the highest value in interpretation of data, insight regarding business problems, and advising on best practices. Analytic Focus can be reached at (205) 672-9253 or visit us at www.analyticfocus.com.

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