The role of computer usage in the availability of credit for small businesses

Purpose – The purpose of this paper is to provide a descriptive analysis of the role of computer usage in determining the credit score for small business owners. Design/methodology/approach – Bitler, Robb, and Wolken report over three‐quarters of all small business use computerized systems. Since such systems are faster, more accurate, and less fallible than manual systems, we investigate whether increased use of computers leads to better credit ratings and leads to access to larger credit lines. Findings – The results suggest that computer usage has virtually no effect in the determination of credit by financial service providers. Credit analysis and risk measures dominate the decision‐making process. Research limitations/implications – The 3,561 surveyed firms are skewed toward very small firms with approximately 64 per cent having less than five employees and an 20 per cent having less than ten employees. Forty per cent of the firms have annual sales of less than $100,000 while only 1.8 per cent of the firms have sales in excess of $10 million. Practical implications – Computerization is an operational necessity but credit worthiness is a function of the overall management characteristics of the firm and not the tools employed by the management team. Originality/value – A minority of small businesses do not use computerization and these tend to be among the smallest in size and with the lowest levels of credit‐worthiness. Nonetheless, credit worthiness is determined by standard credit analysis and risk measures rather than operational efficiency.