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A NOTE ON THE USE OF SELECTED NONFINANCIAL RATIO VARIABLES TO PREDICT SMALL‐BUSINESS LOAN PERFORMANCE*

Scott S. Cowen, Albert L. Page

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Abstract

ABSTRACT Small business loan applications have not been evaluated successfully by traditional methods. This paper explores the possibility of using three types of nonfinancial ratio variables (owner, firm, and loan characteristics) to predict whether a small business will pay off or default its loan. The owner and loan variables were better predictors of loan success than the firm variables.

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What this paper is about

ABSTRACT Small business loan applications have not been evaluated successfully by traditional methods. This paper explores the possibility of using three types of nonfinancial ratio variables (owner, firm, and loan characteristics) to predict whether a small business will pay off or default its loan. The owner and loan variables were better predictors of loan success than the firm variables.

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Available abstract

ABSTRACT Small business loan applications have not been evaluated successfully by traditional methods. This paper explores the possibility of using three types of nonfinancial ratio variables (owner, firm, and loan characteristics) to predict whether a small business will pay off or default its loan. The owner and loan variables were better predictors of loan success than the firm variables.

Key concepts: Loan, Business, Non-performing loan, Small business, Actuarial science, Econometrics, Finance, Economics

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A NOTE ON THE USE OF SELECTED NONFINANCIAL RATIO VARIABLES TO PREDICT SMALL‐BUSINESS LOAN PERFORMANCE* — Research Paper | ScholarLens