Score Savvy

By next summer, small businesses should have credit scoressimilar to those already assigned to most consumers. Lenders willuse the scores to size up the credit-worthiness of small businessesthat apply for loans. That's good news for those whose credithistories can be easily summarized in a single number, but itwon't make the loan process any easier for businesses whosecredit histories are more complicated than plain vanilla. In April,the SBA announced it had hired two giant credit informationcompanies--D&B and Fair Isaac--to build credit models based onthe SBA's enormous portfolio of guaranteed loans. The scoreswill operate the same way as consumer scores: the lower the score,the higher the interest rate.

The resulting model, which is supposed to be completed thisfall, will be used to create generic credit scoring templates thatcan be used to sort loan applicants into three piles: automatic"yes," automatic "no" and "maybe--get moreinformation." Jonathan A. Scott, an associate professor offinance at the Fox School of Business at Temple University inPhiladelphia, says borrowers whose credit histories need explainingwill still have to cultivate the goodwill of their lenders and drawon those relationships to seal the deal.