Sep 06, 2013 Sean Albert
Small businesses and startups may not realize it, but who they interact with online could be affecting their credit scores and their ability to access financing.
According to a recent article from InformationWeek, an emerging group of lenders in the finance industry are adding a new component to determining whether or not companies should be extended loans: social media. These entities ask applicants to give them access to their accounts - whether they be Facebook or Twitter.
The purpose of these efforts is to understand businesses at a deeper level. The news provider explains that such lenders believe a FICO score only tells part of the story. Social media insight can include how present businesses are and how often they interact with customers via the sites - all of which makes them seem like more savvy owners and thus more attractive people to award financing to.
Other factors include the types of people and businesses to which applicants are connected and how they interact with the community, the news source wrote.
Businesses are considered to have similar traits as those with whom they network. If they converse and build relationships with firms and individuals who have demonstrated responsibility and success, this could help companies access credit, as they will be considered to have similar values and behavioral patterns. In essence, it matters what's happening online.
However, among some organizations this causes alarm rather than eases fears. Digital Trends recently explained, though, that they should stay calm. Creditors have actually been doing this for years, and it doesn't affect any actual credit scores. The move just represents an opening of new factors to assessing the reliability and worthiness of applicants in a more holistic fashion.