Banks are changing how they calculate small business loans. They are introducing Small Business-specialised Credit Evaluation (SCB), which assesses business growth potential such as sales, industry and commercial area in addition to past financial information. Actual use differs by bank. Some raise internal grades for strong borrowers to increase approval chances, while others also apply preferential loan limits and expand eligible support targets.

The Financial Services Commission said on Sept. 2 that SCB has entered a pilot run in the banking sector. The approach adds business growth potential such as sales, industry and commercial area as a separate evaluation axis to credit assessments that have focused on financial transaction history and repayment capacity. Small business owners with high growth potential can receive an upgraded growth credit grade compared with their existing credit grade. That could lead to loan approval, higher limits or lower interest rates.

In pre-screening at banks, there were cases where results for borrowers previously rejected under the existing method were reversed. A man in his 40s identified as A, who runs a coffee shop, was classified as a thin filer with insufficient credit transaction history. He received a grade 7 under the existing credit assessment and his loan was rejected. After SCB additionally reflected business growth potential and related repayment capacity, his grade was upgraded to 6 and he received loan approval.

The "growth potential" assessed by SCB does not stop at a simple qualitative judgment. Under banking sector guidelines, the growth grade, or S grade, which indicates a small business owner's future growth potential, is divided into 10 grades. It is classified into 4 segments that reflect industry characteristics, and growth is judged based on factors such as sales growth rate and annual sales 규모. It uses a statistics and AI-based quantitative model as the basis, while qualitative assessment is used by adding points to the grade calculated by the quantitative assessment.

The assessment uses sales, industry and commercial area, as well as business continuity, years in operation, number of workers, customer awareness and demand. For businesses using distribution platforms, visits, repeat visits and bookmarks can also be considered comprehensively. When the Credit Information Service calculates the growth grade, credit bureaus combine it with the existing credit grade to create a growth credit grade, which banks use in actual credit screening.

◆From internal grade upgrades to preferential limits... differences by bank in application

In practice, banks are using SCB not to replace existing credit evaluation but to additionally reflect business growth potential that the existing evaluation could not sufficiently capture. Still, banks differ in how they apply SCB results to actual loan screening.

One bank is currently using SCB for an "override" strategy that raises internal strategic grades for strong borrowers. Even if a borrower failed to meet lending criteria with an internal strategic grade 7 under the existing credit assessment, the bank can raise the internal strategic grade to 6 if the borrower receives a strong grade in SCB, allowing entry into the approval range.

This bank is currently prioritising SCB for loan approval strategy and is not applying separate preferential interest rates or limits. It is discussing a plan to provide additional limits to strong SCB borrowers and plans to implement it in September.

Another bank is applying preferential loan limits and expanding eligible support targets for borrowers with strong SCB grades. It maintains the existing credit assessment and credit screening, while additionally checking SCB results to supplement judgment on growth potential that is difficult to fully reflect through the existing evaluation alone.

Banks commonly explain that they are using SCB as an additional indicator rather than an independent screening standard that replaces existing CB grades or internal credit assessments.

A banking official said, "In the past, screening focused on the representative's personal CB information and financial information, but after SCB was introduced we can additionally refer to business-specific information such as sales flow, business continuity and growth potential."

◆SCB is a "supplementary indicator"... limits when delinquency or excessive debt exists

A high SCB growth grade does not automatically mean a loan is approved. One bank said that even if an SCB grade is strong, a borrower may not enter the approval range if the existing internal strategic grade or converted corporate grade fails to meet a certain level.

Another bank also stressed that borrowers with strong SCB grades may have additional support potential compared with before, but support can be limited if they fail to meet existing screening criteria such as delinquency.

Another banking official said, "Even if the SCB growth grade is high, loans may be restricted or the borrower may be excluded from preferential treatment if other risk factors are identified, such as a history of delinquency, excessive debt or insufficient repayment capacity."

The guidelines also prohibit operating a screening system in which loan approval is automatically determined by using only SCB evaluation results. Banks must reflect SCB results in credit screening together with existing creditworthiness and repayment capacity.

SCB does not eliminate existing credit assessment. It is closer to a supplementary device that gives an additional evaluation opportunity based on growth potential to small business owners who were below the borderline under existing assessments or whose business viability could not be sufficiently 인정 based on financial information alone.

◆How far on approval, limits and rates... perceived impact is key

Financial authorities have opened the scope for using SCB for loan approvals, limit increases and interest rate cuts, but the actual scope and preferential standards vary depending on each bank's credit strategy. Banks said the decision on whether and how much preferential treatment to give based on SCB grades is set by each bank, considering a borrower's risk level and internal credit policies.

The guidelines also allow banks to operate loan limits, interest rates and collateral levels differently depending on SCB evaluation results, while not setting uniform detailed preferential standards.

In pre-screening cases disclosed by the Financial Services Commission, there were also cases where both interest rates and limits improved. A man in his 30s identified as B, who operates an online platform franchise store, was recognised with a top SCB grade and received an additional 1.0 percentage point interest rate reduction, allowing him to use 30 million won in business funds at an interest rate in the 3 percent range. A wholesale and retail operator identified as D saw the available loan amount rise to 40 million won from about 30 million won, an increase of 10 million won, and also received about a 0.7 percentage point interest rate benefit.

A liability exemption mechanism was also 마련 to support active use by banks. If a bank and its employees handled SCB loans in compliance with relevant laws and internal procedures and based on reasonable grounds, they will not be sanctioned solely because the loan later results in bad assets or losses. If there is no private conflict of interest and no major procedural defect, intent or gross negligence is presumed absent unless there are special circumstances.

The pilot run started with 8 banks: KB Kookmin, IBK Industrial Bank of Korea, NH NongHyup, Busan, Shinhan, Woori, Jeju and Hana Bank. Another 8 banks, including Kyongnam, Gwangju, Suhyup, iM, Jeonbuk, Kakao, K and Toss Bank, are set to participate sequentially in the second half of the year. The Financial Services Commission said the target size for the pilot is a total of 2.2 trillion won.

Ultimately, the key to introducing SCB is bringing business growth potential into actual credit screening for small business loans, which is difficult to capture with "past credit" alone. Still, differences are already emerging by bank from the early stage of the pilot in the areas where SCB is used, such as approval decisions and limits. How broadly growth grades are reflected in interest rates, limits and approvals is likely to determine the effect of the system as felt by small business owners.