Can social media affect your credit score? - Small Business Association of Michigan

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Can social media affect your credit score?

Can social media affect your credit score?

By Ben Goldstein, courtesy of Credibly

Most small business owners, at one time or another, will look to grow their business by taking out a small business loan, and all lenders have certain criteria to help them decide whether or not your company is worth the risk. While financial statements and business plans are certainly critical pieces of the puzzle when you apply for funding, believe it or not, your business’s social media activity may be under scrutiny as well.

Why Your Social Media Activity Matters to Lenders
When evaluating whether or not to invest in your business, a lender wants to understand your company’s overall health and potential financial status. Business credit scores and financial statements can tell a lot about your company, but if your business is young, this information may be limited.

That’s where social media comes in.

Your small business social media accounts can help paint a bigger picture of your earning potential. An engaged audience, five-star reviews, and a large following can be big indicators of a healthy and growing establishment. Banks and online lenders are looking at your ability to repay a small business loan, and strong social media accounts can give them confidence in your company’s ability to make good on its investment.

Using Social Proof to Raise Your Business Profile
Nowadays, online lenders often take into account data collected from a business’s online presence in addition to traditionally collected information like bank statements and tax returns. Showing outstanding customer service to customers on your social media channels is a sign that you’re serious about your business, which makes your business more attractive to lenders.

What does this mean for your business plan? As the world turns more mobile, make the time to build your online presence. Even if you have a brick and mortar establishment, realize that your online reputation is just as important as your physical footprint, so invest the resources to make it a priority.

Take the time to create a well-designed and functional website. Establish your presence on popular social media sites such as Facebook and Twitter, and be vigilant in responding to questions and comments. Not only will your sales most likely improve, but you will also create a strong picture for potential lenders and investors.

Get Social!
While a small business’s social media accounts will not be the biggest factor a lender takes into consideration when making a lending decision, it’s an increasingly important factor that shouldn’t be ignored.  More and more banks and alternative lenders are coming to see the benefit of assessing this vast amount of online data.

Of course, the free advertising you will receive from engaged and happy customers is its own reward. What social media strategies do you have in place to ensure that potential lenders see your business in the best light?
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