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Small Biz Owners Rejected Despite High Credit Ratings

By Sally Maison
Published: Wednesday, January 20th, 2010

Maureen Isern is not new to production. She had earlier stints with MTV and CBS. But a couple of years ago, she decided that it was time to continue her TV production completely on her own. In 2007, she started Moped Productions in her apartment. Drawing out funds from her savings and her credit card, the multimedia firm was able to withstand the shaky economy and Isern thought, last year, she it was about time to expand it. To her surprise, the 31-year old producer was rejected despite her top-tier credit score.

Small Biz Owners Rejected Despite High Credit Ratings Isern was discouraged from applying for loan when she approached banks and the United States Small Business Administration. She was told that her firm is yet too small and she was not at a level to safely lend money to. Not even her credit score of 700 was enough to convince creditors that she will be able to pay her loan back. She decided not to continue applying with banks since getting rejected over and over again would harm her credit rating.

Frustrated yet determined to move forward with her business, Isern turned to a local microlender and was granted a $7,000 which really helped her small production firm.

Like Isern, many small-time entrepreneurs would have easily acquired loans prior to the recession. But the economic downturn literally turned things around and made if very difficult for them to secure loans from banks even if their credit ratings are well over the 700 line.
But some analysts are not surprised that banks are refusing to lend to small business owners. They explained that banks have lost their appetite in underwriting small dollar loans because they take time and do not really give big returns. For instance, a $30,000 could take the same amount of time to underwrite $1 million loan, which explains why many small business owners have not been having successful shots with banks.

Additionally, huge banks are now more reluctant to take risks with small businesses.  Hence, it is not surprising that huge credit ratings are not enough to make banks loan money to small-scale entrepreneurs.

Even entrepreneurs with bigger networks find it difficult to get financing from banks, noted Lisa Servon, dean for a non-profit organization based in New York. Juan Torrez could attest to that.
He has been running a graphic design business for the past three years and has a near-perfect credit score of 800 but was still rejected when he applied for bank financing because he did not have enough property to secure his loan. Torrez was able to get financing from the same lender that approved Isern.

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