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How Social Media Strengthens Your Loan Application

Using social media wisely can help you attract new customers, connect with partners and vendors, and grow your business. But did you know that it could also help you get a small business loan? A growing number of lenders—mostly online lenders—are using social media as part of their loan underwriting process. Here’s a closer look at what they’re doing, why they’re doing it and what you need to know about the practice.

While traditional bank lending is still primarily based on the 5 “C’s” of credit— Character, Capacity, Capital, Collateral and Conditions—nonbank lenders are innovating new ways of assessing applicants’ creditworthiness. Data from social networks, including Facebook, Twitter, LinkedIn and online ratings and review sites like Yelp, is part of the mix.

No, that doesn’t mean lenders will reject or accept you based on that Facebook post of you holding a beer at your last Fourth of July barbecue. Your business and personal credit score, business history and financials still matter most. However, lenders that use social media data believe the information gives them a fuller picture of the loan applicant and the business—so why not use it?

Some of the information that online lenders will look at on social media includes:

  • Confirming that information such as name, address, name of business, job title, etc. are consistent across all social media sites
  • How long the business has had its social media accounts (this corroborates the time in business)
  • How many social media connections the applicant and the business have
  • The quality, seniority and type of connections
  • Ratings and reviews of the business
  • “Buzz” about the business, its products and services on social media sites
  • How often and how well the business interacts with customers on social media (for example, do complaints or questions get a response?)

So far, using social media in underwriting is mostly limited to online lenders who tend to make smaller loans. However, some bigger banks and even credit scoring agencies are exploring adding social media into their mix when considering loan applications. One stumbling block for banks is that there is still no regulation in place as to how social media data can be used in underwriting, as long as the lender complies with fair lending laws. However, as the use of social media in underwriting grows, that will undoubtedly change.

Is the use of social media data a good thing or a bad thing for small business owners seeking financing? Advocates contend that incorporating social media gives businesses that are new, lack a track record or have a bad credit history a way to make up for those shortcomings by providing more information. (Allowing a lender to access your social media accounts is voluntary.) Opponents say it could lead to businesses being denied credit or getting poorer loan terms based on their social media profiles.

What can you do to improve your social media standing with a lender?

  1. Be responsive to and engaged with your customers on social media. Demonstrating that you have a positive relationship with customers is a plus for lenders; it signifies your business is valued by its target market and likely to have longevity.
  2. Regularly read and respond to online reviews of your business. The way you handle feedback is a good indicator of your temperament and character. In addition, a company that gets poor reviews is unlikely to survive for long.
  3. Focus on strong connections. You don’t need 2,000 LinkedIn connections to impress a lender. In fact, fewer but stronger connections are more likely to make an impact. Regularly interacting with respected members of your industry on social media, showing yourself as a thought leader, and being involved with the community where you’re located are all good indicators of a stable business that has a promising future…and will be around long enough to pay back a loan.



Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky