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ICBA Statement on New SBA Lending Study

Relationships Still Drive Small Business Lending Decision-making

Washington, D.C. (November 16, 2006)—The Independent Community Bankers of America (ICBA) Chief Economist and Director of Tax Policy Paul Merski issued the following statement regarding a new Small Business Administration study released today on the use of credit scoring in small business lending. The study finds that despite the increased availability of business credit scoring, the relationship between a small business and a bank remains the dominant factor in loan underwriting and credit availability to our nation's small businesses.

"For community banks, first-hand knowledge of the local community and its citizens has always been the key to successful small business lending. Our nation's thousands of community banks do not evaluate small business borrowers solely as a number from a credit score, but use their first-hand knowledge of their customers and their businesses plans to provide more flexible loan options. While credit scoring certainly can assist a bank in the loan underwriting process and help measure risk, the heart of successful small business lending involves knowing your customer.

"This underscores the importance of ensuring our laws and regulations promote a strong and diverse financial system where local lending is readily available to small businesses. Small businesses represent 99.7% of all employers in the U.S., employ half of the private sector workforce, create more than half of our nation's gross domestic product and are responsible for as much as 80% of the net new job growth annually in recent years. Community banks have been instrumental to the strength of our nation's small businesses and key to maintaining their vitality."

For more information on the SBA study entitled "A Survey Based Assessment of Financial Institutions Use of Credit Scoring for Small Business Lending," visit www.sba.gov/advo.