Determinants of Small Business Default
Posted: 11 Jul 2005
In this paper, we empirically assess the importance of various credit risk characteristics in determining default behavior of more than 31,000 small business loans and lines both under $100K and between $100K-$250K. Overall, our results indicate that the main drivers of small business default include: checking account balances, collateral indicators, credit risk scores, and firm age. However, once we differentiate between spot loans and lines of credit and between loan sizes, small business default behavior differs significantly.
Keywords: Spot loans, line of credit, scored lending, loan size, small business defaults
JEL Classification: G21, G31, L23
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