The decision of loan approval is determined by a computerized credit scoring program for loans under $100,000. Automated credit scoring reduces the subjectivity of the loan process.

• Having a relationship with your banker does help in some areas, but not with automated credit scoring.

• Automated credit scoring can actually help some companies. A loan officer with many failed restaurants in his portfolio may be more inclined to deny your loan, but the credit scoring system would remove this kind of bias.

• Often credit scoring removes the need for a business plan and requires only financials. Employ the following strategies to help finance your business.

1. Assess Your Credit Needs. If the amount you are applying for is $100,000, apply for $110,000 or more. Then if the bank requests a business plan, it will most likely not use credit scoring.

2. Get Your Credit Report. Before making any loan or credit application, be sure to obtain your credit reports and check (and correct) any errors or omissions.

3. Be Accurate. If the bank is using credit scoring automation, be sure to go over all questions in the application. Make certain you understand the information in the application and that the data you provide is completely accurate.

4. Watch the "Code" You Use. The bank may code your company by NAICS (North American Industry Classification System) or the dated SIC (Standard Industrial Classification) codes. Make sure you provide an accurate description of your business. Inaccurate coding can alter the outcome of your request.

5. Know Why… Be sure to ask for an explanation or review in person if your application is declined. This is your right so don't be shy. Errors can be made even with automated credit scoring.

6. Apply with the Right Bank. Consider the type of bank you select when applying for small business financing. A larger bank will use the automated credit scoring system more. Look for a specialty bank for a particular industry.


adapted from D. Zahorsky