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Will Georgia entrepreneurs have tests in business organization?

A large part of starting a business in Georgia is securing the financing to begin. During the business organization process, entrepreneurs may be required to meet with lenders or bankers in order to discuss the plans for the business. A recent report indicates that some of the bankers and lenders associated with starting businesses believe that a simple questionnaire may help determine which entrepreneurs are worth the risk.

Policy researchers using psychometrics much like those used for years in the NFL, psychology and the corporate world have developed a 40-minute questionnaire. For entrepreneurs, the questions are open-ended and include questions regarding their tendency to party, their belief in luck and others. After a two-year study by the developers, they believe that the questionnaire is a "cost-effective predictor" of which entrepreneurs are most likely to repay loans.

Two Harvard policy researchers designed the questionnaire, and the test was primarily conducted in Africa. The company is now called the Entrepreneurial Finance Lab, and some banks appear to be on board for use of the questionnaire. The recent report indicates that the delinquency rate of an entrepreneur who met both the lenders credit scoring and EFL's questionnaire, was only 2.8 percent. For entrepreneurs who did only the lenders credit scoring, the delinquency rate was 14.5 percent.

Promising results from a simple questionnaire that many Georgia banks may could use to reduce risk. As an entrepreneur works through the business organization process, finding the right lender to support the business can be a challenge. According to this report, those challenges may be less with the use of the questionnaire, as lenders can more confidently support their chosen entrepreneur.

Source: Pacific Standard, "Can a Test Tell If You're a Good Entrepreneur?" Michael Fitzgerald, Dec. 5, 2012

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