Title

A Neural Network Approach for Analysis of Small Business Lending

Publication Type

Journal Article

Publication Date

2000

Abstract

In this paper, we apply the neural network method to small business lending decisions. We use the neural network to classify the loan applications into the groups of acceptance or rejection, and compare the model results with the actual decisions made by loan officers. Data were collected from a leading bank in Central New York. The sample contains important financial statement and business information of borrowers and the loan officers' decisions. We conduct the network training on the data sample and find that the neural network has a stronger discriminating power for classifying the acceptance and rejection groups than traditional parametric and nonparametric classifiers. The results show that the neural network model has a high predictive ability. Our findings suggest that neural networks can be a very useful tool for enhancing small-business lending decisions and reducing loan processing time and costs. [PUBLICATION ABSTRACT]

Discipline

Business

Research Areas

Quantitative Finance

Publication

Review of Quantitative Finance and Accounting

Volume

15

Issue

3

First Page

259

Last Page

276

ISSN

0924-865X

Identifier

10.1023/A:1008324023422

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