Non-traditional Ways That Banks Rate Your Creditworthiness
If you’re looking to get a small business loan, it’s time to take down those photos of you drinking the tequila worm in Cabo on your Facebook page. As small business lending moves away from traditional institutions such as banks, alternative lenders are looking more and more at alternative sources of information to determine financial responsibility. And your social media footprint is just a small piece of that puzzle.
If you’re looking to get a small business loan from an alternative lender, and even some banks, these are the kinds of things they’re going to look at to assess risk:
Social media footprint
Believe it or not, who you connect with via social media and the things you share can help determine if you are eligible for a small business loan. Thinking from a fraud perspective, if you’re a potential lender and the big data machine turns back information that is incongruent with who you claim to be, there’s going to be a big red “NO” on your loan application.
This one is an obvious one. Sometimes lenders will request access to your banking information to be able to view your cash flow history. Are you able to keep enough money in the bank to cover your expenses? Do you overdraft often or have recurring late fees? These kinds of things are red flags to potential lenders.
It’s also important to note that alternative expense management options such as prepaid cards are a good source of rich data. Many burgeoning new prepaid companies offer real-time expense tracking and management, and all that accumulated data is data gold to potential investors.
Online buying and web browser history
Your online buying and web browser history can determine your buying habits and whether or not you’re serious about the investment you’re planning on making. Do you buy things that are relevant to your business? Are you often on the internet researching your market or communicating with customers and partners? If so, you may be a good candidate.
Though this may seem completely irrelevant, alternative lending company Kabbage determined that an underwriting model relying on shipping information was actually better at predicting risk than the traditional model that relies mainly on FICO scores.
If all your Yelp reviews include angry customers or claims of fraud, your lenders are most likely going to assume that your business model is not a sustainable one and will not be willing to lend you any cash.
More and more, investors are wanting to get to know who their borrowers are, and not just what their credit scores say. This is good news to a lot of small or new business owners whose credit scores may be less-than-perfect. If you’re a financially responsible person, your web footprint should show it and help you get a small business loan.