In this study, we use data from the World Bank’s Enterprise Surveys of 80 countries over the period from 2006 – 2011 to model the credit-allocation process for SMEs into a sequence of three steps. Based upon these three steps, we classify small businesses into four groups based upon their credit needs. In a first step, we analyze which firms do, and do not, need credit. The ?no-need? firms have received scant attention in the literature even though they typically account for more than half of all small firms. We find that a ?no-need? firm is older and smaller than a firm that needs credit; is more likely to be organized as a corporation and to have an outside auditor; is more likely to be owned by a male and by a foreigner; and is more likely to be located in a small city and in a country with higher GDP per capita and GDP growth. In a second step, we analyze firms who need credit but fail to apply because they feared being turned down or thought that interest rates and collateral requirements were too unfavorable (discouraged firms). Like the ?no-need? group, discouraged borrowers have received little attention in the literature. Discouraged borrowers typically outnumber firms that apply for and are denied credit. Among firms that need credit, we find that a ?discouraged? firm is younger, smaller and growing slower than a firm that applied for credit; is much less likely to be organized as a corporation or to have an external auditor; is less likely to run by an experienced management team or to be owned by a foreigner or female; and is more likely to located in a small city and in a country with higher inflation and lower GDP per capita but with higher GDP growth. In our third step, we analyze firms that applied for credit and either were turned down (denied firms) or were extended credit (approved firms). Among firms that apply for credit, we find that an approved firm is older, larger, and grows faster than a denied firm; is less likely to be organized as corporations but more likely to have an external auditor; is more likely to be run by more experienced management team and to be owned by foreigner and a male; and is more likely to be located in a large city and in a country with lower inflation and GDP per capita but higher GDP growth.