Can your social media popularity land you a loan?

Can your social media popularity land you a loan?

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There’s a new trend in lending risk evaluation that has started to turn some heads. Lenders are starting to take advantage of the huge amount of data available on small businesses via social media sites. When considering a business for a loan, alternative lenders and some technologically advanced banks and credit unions have started including data on a business’s social media following in their underwriting process.

What does this mean for you? Well, your ability to market your business on social media sites could influence your ability to get a loan or the total cost of your loan.

What exactly are lenders looking at?

When considering a business for a loan, many traditional banks are still focused on traditional assessments of fiduciary health, such as commercial credit history or company financial statements. Online lenders are beginning to take advantage of the goldmines of data made available by the internet. These data include:

  • Social media information
  • Website traffic
  • Yelp reviews
  • Business valuation
  • Accounting reports

And so on. After all, a business that’s only been in business for a few months or even years is at a disadvantage when it comes to the sort of financial information that a bank prioritizes. Because business credit history is a major factor when considering commercial bank loans, many startup establishments won’t even prequalify. But what if a young business has streams of customers at its doorstep every day, who register their glowing approval online in the form of dozens of five-star reviews? What if orders for a new product are flying through the roof? Online alternative lenders are starting to see that these developments should be considered while evaluating the risk level of a business borrower.

Steps to take online

Whether you’re currently looking for a loan or not, you stand to gain more than lose if you:

  1. Prioritize your virtual presence from this moment on. Don’t yet have a business website? Now would be a good time to set one up. Yelp page? Set one up and ask your regular customers if they’ve seen you on Yelp. Facebook? Again, ask your customers if they can “like” your page and consider offering special deals for those who do.
  2. Learn what might hurt and what might help as you participate in that all-knowing, all-seeing, all-retaining forum called the Internet. Be mindful of what you say so that your business remains in good light.
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Steps to take while preparing for a loan

Here are a few things to keep in mind as you prepare:

  1. Reality rules. At the moment, your social media presence will almost always be of secondary importance to lenders, traditional or otherwise. Your first focus should be on your personal and business credit, checking data, financial records, and other fundamentals.
  2. Books are judged by their covers. If you have a retail business that’s strong on retail but weak on social media, it’s a problem, not just in the eyes of your lender but in the eyes of your customers as well—you could be missing out on tons of business! First impressions have always mattered, but in an increasingly impersonal world, where more and more of your customers are people you’ll never meet face to face, looking weak online says a lot about your business.
  3. Stay ahead of the game. Check your online reviews every day, and reach out immediately to dissatisfied customers with every tool at your disposal. In a star-based review, the difference between five stars and four stars may seem paltry in theory, but in practice it could cost you dozens of visits a day. In the not-too-distant future, it could cost you a loan. Stay on top of it.
  4. Keep an eye on the future. In the words of Levi King, the ruggedly handsome CEO of Nav, “[Social media] will only grow in significance and importance over time. [Social media] channels are becoming strong indicators of behavior, intent, and surrounding activity that doesn’t show up in credit data. It will … be a long time until you can get a business loan solely off of [social media] data, but those days will likely come.”
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About the Author — Lydia serves as Content Manager for Nav, which provides business owners with simple tools to build business credit and access to lending options based on their credit scores and needs.

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