Credit scoring and the availability, price, and risk of small business credit

We find that small business credit scoring (SBCS) is associated with expanded quantities, higher average 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.