How are lenders using social media, and how does the process affect your application? Learn more inside.
In the last few years, businesses both big and small have been increasing their social media presence.
Why? Because that’s where their customers are.
As reported earlier this year, 78 percent of U.S. Americans have a social network profile a five percent increase in the last year alone and usage only seems to be increasing.
Plus, there are many benefits of giving your business a digital, branded identity.
Whether it be on Facebook, Yelp, Instagram, or the like, using social media is a great way for businesses to engage directly with their customers, increase brand awareness, help attract new customers, and help them qualify for small business loans. Wait, what?
No, you didn’t misread that. Although this is not the norm for lenders across the board, a growing number of alternative lenders are actually using social profiles as part of their loan underwriting process.
But how are lenders using social media exactly, and how does the process affect your application? Let’s take a closer look.
How Lenders Are Using Social Media
Unlike companies that are using social media as a way of vetting their employees, lenders do not mine your Facebook profile and flag photos from your college days. Instead, they’re looking into your social media data to verify certain information about your business. Here’s what lenders are scanning on your social media profiles:
- Does the information on your loan application match? Lenders check the name of your business, your address, your name, job title, and other sort of information match with what is on your loan application.
- Are your customers happy? They’ll scan the types of ratings and reviews your business regularly receives. If your reviews are mostly negative, what does that say about your business? Will you be able to keep your doors open?
- Is your business popular? Lenders are interested in the number of social media connections your business has and the quality of those connections.
Do you respond to complaints and questions? How often and how well you interact with your social connections matters. Are you proactively providing a good service and experience to your customers and larger network?
How Does This Affect You?
When it comes to getting approved or denied for a loan, having a lot of social media followers is not going to outweigh having a low credit score. However, an impressive online identity can be just what you need to tip the scale in your favor if your application is teetering on the edge of approval.
If you are just starting out and have little to no business credit history, lenders may use your social media profile as a way of filling in the gaps. Remember, your online identity can do a lot more good for your business than just helping you get a loan, so it can never hurt to pay your social profiles a little extra attention.
Related Article: Why Collateral Matters When Getting a Small Business Loan
How Can You Improve Your Social Media Presence to Be More Appealing to Lenders?
Make sure all your business information is up to date. In other words, the address on your online profile should match up with what you listed on your loan application. If the information isn’t the same for some reason, it could raise some red flags for lenders.
Be interactive and engaged with your customers on social media. Respond to their questions, comments, or complaints. If lenders see that you have a positive relationship with your customers, it’s a good indication of a growing and thriving business.
It’s about quality over quantity. You don’t necessarily need to have thousands of connections on your social sites to impress lenders. Having a few strong connections is more likely to impress them and show them that it’s likely that you and your business intend to stick around.
The Future of Social Media in Lending
Currently, the majority of lenders checking out your social media profile are online. However, some of the bigger banks and credit scoring agencies are looking to get involved as well. The Fair Isaac Corporation (FICO), for example, has said that it’s considering incorporating social media into their credit score calculations.
Although not every lender uses social media as a way of determining your loan eligibility, as more lenders hop on the bandwagon, your online identity is going to start becoming more and more relevant to your business loan applications.
As you can see, the impact social media has on businesses is starting to increase. So if your business doesn’t already have a social media presence, you may want to consider joining your peers and creating one.