In the not so distant past, when money was cheap and time was tight, a FICO score of 700 and a one-page application was enough to land a $150,000 business loan.In the time it takes to get a drive-thru cheeseburger, some of the biggest small business lenders in America were handing out lines of credit by relying heavily on personal credit scores to rubber-stamp applications. Given that most business loans are unsecured, a lender has little recourse, when a loan goes sour, beyond the personal guarantee of principals. And if the principals backing a loan are broke, a personal guarantee is virtually useless. In a conference call with analysts back in October 2008, former Bank of America (BAC) Chairman and Chief Executive Kenneth Lewis memorably called the deteriorating credit quality of the bank’s small business portfolio “a damn disaster.”

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Big Changes in the Business Loan Approval Process