The Loan Sytem

Credit scoring system for small business loans

Ray Tsaih, a, , , Yu-Jane Liub, Wenching Liua and Yu-Ling Liena 

a Department of Management Information Systems, National Chengchi University, 64, Chih-nan Road, Sec. 2, Wenshan, Taipei 11623, Taiwan, ROC

b Department of Finance, National Chengchi University, Taiwan, ROC 

Received 1 January 2003;  accepted 1 April 2003.  Available online 28 June 2003. 

Abstract

A requirement of a credit scoring decision support system for small business loans is that the embedded scoring model can be easily altered in accord with the change of business environment. To satisfy such a requirement, this study proposes an N-tier architecture integrated with the idea of Model-View-Controller. With this design, the system engineers can avoid frequently investing considerable time and effort in communicating with the model managers for finalizing the scoring models, and model managers can easily alter the embedded scoring models later at any time.

Author Keywords: Credit scoring system; Small business loans; N-tiers; XML 

Article Outline

1. Introduction

2. Developing scoring models

3. Small business credit scoring system

Step 1

Step 2

Step 3

4. Summary and future work

Acknowledgements

References

Vitae

1. Introduction

Many banking institutions have stepped up their effort in developing relationships with small businesses. However, this lending involves high potential risks due to the information asymmetry and time-vary essentials of a small business. Unlike large firms that are easy to raise funds from public debt markets, small firms rely on lending from commercial banks. On the other hand, lending to small business is beneficial to commercial banks because the margins on small business lending are higher than on many other bank products [11]. But it is difficult for banks to obtain detailed information from small firms since the financial reports of small firms are mainly for tax purposes [1and 5]. For managing...