Credit Scoring and the Availability, Price, and Risk of Small Business Credit

By Allen N. Berger, W. Frame, Nathan H. Miller. 2002

192 citations recorded by the source corpus.

We find that small business credit scoring (SBCS) is associated with expanded quantities, higher averages prices, and greater average risk levels for small business credits under $100,000, after controlling for bank size and other differences across banks. We also find that: (1) bank-specific and industry 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 larger credits. The data do not support two alternative explanations of the main results under which the findings primarily represent statistical artifacts, rather than significant changes in lending behavior.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/9841fc443ccbd5658fee144a862b44ef1da2c52e

Citations in the corpus

• Do Small Businesses Still Prefer Community Banks (2013, unknown): “…their lending to opaque small businesses using credit scoring technology (e.g., Frame, Srinivasan, and Woosley 2001, Frame, Padhi, and Woosley 2004, Berger, Frame, and Miller 2005) and two studies find that small business credit scoring is responsible for an increase in lending distance over time…”
• SME Financing and the Choice of Lending Technology in Italy: Complementarity or Substitutability? (2013, unknown): “Moreover, Berger et al. (2005) show results consistent with the hypothesis that the use of credit scoring increases SME credit availability (in particular for relatively risky credits).”
• The Surprising Use of Credit Scoring in Small Business Lending by Community Banks and the Attendant Effects on Credit Availability, Risk, and Profitability (2011, unknown): “As reported in the 1998 survey, most of the very large banks did not adopt SBCS until 1995, when Fair, Isaac and Company introduced its first SBCS model (e.g., Berger et al. 2005b ).”
• Personal Bankruptcy and Credit Market Competition (2010, unknown): “(11)Berger et al. (2004) find that the adoption of small business credit scoring by larger banking organizations in the mid 1990s is associated with increased credit availability, higher average loan spreads, and greater risk, likely as a result of banks’ expansion into more risky segments.”
• A more complete conceptual framework for SME finance (2006, unknown): “Berger, Frame, and Miller 2005).2 C. Asset-Based Lending Asset-based lending is a transactions lending technology in which financial institutions address the opacity problem by focusing on a subset of the firm’s assets, which are pledged as collateral, as the primary source of repayment.”
• Harming Depositors and Helping Borrowers: The Disparate Impact of Bank Consolidation (2009, unknown): “Berger, Frame, and Miller (2005) find similar evidence.”
• Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances (2016, unknown): “Both Cole, Goldberg and White (2004) and Berger et al. (2005) provide support for this idea.”
• Measuring and Managing Credit Risk (2004, unknown): “Berger, Frame, and Miller (2002) review the impact of scoring systems on bank loans to the lower end of the SME business6 in the United 74 CHAPTER 3 States over the period 1995–1997.”
• Small Business Credit Scoring and Credit Availability* (2007, unknown): “Finally, Berger et al. (2005b) examine the effects of using SBCS to reduce informational opacity on loan maturity.”