Can Social Media Be a Factor in Loans?
A presence on social media affects nearly every aspect of life. This also includes the financial sector. This isn’t just a factor for personal loans, but also ecommerce and online business loans. A company’s viability can be closely linked to activity on social media sites, such as Twitter, Facebook and Instagram, so it shouldn’t be a surprise that social media is taken into consideration.
Banks Use Social Media: When a bank decides to approve or deny a loan, there are a number of things that are taken into consideration. These things include the history of the company, the size of the company, and the relationship with customers. One of the ways a bank can determine the relationship with customers is the rapport the company has with its customer base on social media.
Alternative Lenders Use Social Media in Algorithms: It’s not just banks that use social media. If you are applying for a business loan with a different lender thinking it will improve your chances, it may not as far as social media is concerned. Alternative lenders don’t just look at how many followers you have, but how engaged you are with customers on social media. If you make an effort to connect with your customers and reach out, then it gives you a better chance of a loan approval.
Social Media Can Indicate Potential Success and Revenue: Any business that is more than a year old and wants funding should consider that a lender might look at its online marketing activities as a predictor of future success. Marketing plans are a key factor when it comes to evaluating loan applications, and online strategies should be an important part of any companies marketing efforts. A business that is doing well on social media shows that it knows how to reach and build an audience and this can be looked at as a strong marketing foundation. This shows that the business has been able to use its available funds for growth and knows what it is doing when it comes to marketing. Lenders are more likely to lend money if they know there will be continued success. While an average social media presence may not hurt the ability to get a loan, a strong one will certainly strengthen the likelihood of approval.
LinkedIn Profiles Reflect Job Stability: Lenders can look at LinkedIn profiles for business owners and investors that are applying for the loan. This can give an impression of job stability or instability. Are they staying in the same general career path or industry? A high volume of short-term jobs and a lot of job changes can indicate there is a higher risk of defaulting on a loan. If owners are considering a business loan, lenders may also look at the management team to see if they have experience in the industry that is related to the business and if they have influential relationships that could help the business grow.
Social media isn’t just important for loans. It also to help your business grow without a loan. If you are trying to crowdfund instead of using a loan, social media needs to tell your story so people care about your business.