SBA Promotes "Entrepreneurial Equality"

by no longer analyzing cash flow on loans less than $350,000.

quote:

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Our Office of Capital Access has been testing and refining a predictive business credit scoring model for more than a decade, combining an entrepreneur's personal and business credit scores. SBA's total credit score will make it easier and less time-intensive for banks to do business with the SBA. This model is cost-reducing and credit-based. It ensures that risk characteristics – not socio-economic factors – determine who is deemed creditworthy.

We're now so confident of our model's predictive value on small loans that we're eliminating cumbersome analyses of a company's cash flow, a step that can delay loan decisions. Effective next month, I'm directing that SBA's total credit scoring model be made available to all our lending partners for loans of $350,000 or less. We're making these changes knowing it will simplify and streamline the lending process and get more small loans into the hands of entrepreneurs, especially the underserved.

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LINK

If you can't take the time to properly underwrite a $350,000 loan, the loan shouldn't be made. If it's too cumbersome for the bank, the bank probably shouldn't be in business, and if the borrower can't wait, I'd question the viability of the loan.

And I've never known cash flow to discriminate any more than a credit score.