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3 Ways Social Media Can Help You Get a Small Business Loan

March 16, 2015
Small Business
social media and business funding
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Social media sites like Facebook and Twitter are tools for branding your business, marketing your products or services and engaging your customers. But a social media presence can also boost your business’s chances of getting financing.

Access to small-business funding is a major challenge for business owners, with many traditional lenders favoring bigger companies when making larger loans. Your social media presence can show lenders that your business is a trusted authority online, and is effectively using social media to promote your brand and respond to customers.

There are many ways to finance your business, including online and traditional bank loans and crowdfunding campaigns. NerdWallet talked to marketing experts about how you can leverage social media to improve your chances of securing all three of these financing options.

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1. Determining terms for online loans

Some online lenders including LendUp and Kabbage use social media data to help make loan decisions.

Kabbage, an Atlanta-based online lender that offers small businesses cash flow loans, asks business lenders to voluntarily give Kabbage access to their social media accounts. Kabbage includes this data in an algorithm that it uses to decide if businesses are eligible for a credit line increase. The algorithm also includes revenue, information about how promptly businesses have paid vendors, businesses’ eBay and Amazon activity, and accounting data from QuickBooks and Xero.

“We’ve found very strong relationships between customers who are active on social media being good customers,” Kabbage Chief Marketing Officer Victoria Treyger says.

Kabbage primarily looks at a business’s Facebook and Twitter activity to see what customers are saying and how quickly and effectively the business responds to comments.

“Really show outstanding customer service to [your] customers, because that is a fundamental sign of a good and thriving business that’s going to do well over time,” Treyger said.

LendUp, an online alternative to payday lenders based in San Francisco, also uses social media data as an underwriting tool. Potential borrowers can voluntarily give LendUp access to their Facebook and Twitter accounts, LendUp chief executive officer Sasha Orloff told the Wall Street Journal in 2014. LendUp didn’t respond to NerdWallet’s request for comment.

Note: Loans from online lenders tend to have higher interests rates than loans from banks and credit unions. If you have good credit, apply for a traditional bank loan instead.

2. Qualifying for traditional loans

Some financial institutions also use social media profiles to help learn more about a borrower’s business before making a loan decision, though not as systematically as online lenders.

Branding expert Mark Arnold advises banks and credit unions about how to effectively market loans on social media. These lenders primarily look at businesses’ LinkedIn pages when determining loan eligibility, Arnold says. They also search companies’ names online, which will likely return additional social media profiles.

Arnold encourages business owners to keep their social profiles up to date, blog about relevant topics in their industries and share those posts on Facebook, Twitter and LinkedIn — an approach that will help your message come across as useful information rather than a sales pitch.

“People will lend money to you if you’re perceived as an expert,” Arnold said.

Social media is still a relatively small consideration for banks and credit unions making business loan decisions. Traditional lenders primarily look at the five C’s: character, the borrower’s trustworthiness; capacity, ability to repay the loan; capital, money the borrower has already invested in the business; conditions, competition and the economy; and collateral, physical assets that guarantee the loan if the borrower can’t repay it.

3. Marketing a crowdfunding campaign

If your business is using reward crowdfunding sites like Kickstarter, Indiegogo and GoFundMe to raise money, social media is a useful tool to market your campaign and draw donors. Share links to your crowdfunding page on Twitter and Facebook and encourage people in your network to share it too.

It can be beneficial to post from your personal social media accounts rather than from your branded business accounts, says Jeff Gibbard, president of True Voice Media, a Philadelphia-based company that helps businesses create social strategies.

“Really put your people front and center,” he said. “Talking to a brand is not something we’re inclined to do.”

Before you start spreading the word about your campaign on social media, make sure your crowdfunding page tells your business’s story using video, photos and text.

“When people get there, you have to have a really compelling story for why they should hand over money,” Gibbard said.

For more tips about how to fund your business, visit NerdWallet’s Small Business Guide.

Teddy Nykiel is a staff writer covering personal finance for NerdWallet. Follow her on Twitter @teddynykiel and on Google+.

Image via iStock.