On Tuesday, August 4, 2015, Facebook obtained a patent that does a few different things, including help filter spam and improve searches. It may also allow lenders to use data from your Facebook and your Facebook friends to approve or disapprove you for a loan.
According to Fortune, the patent says that after applying for a loan, the lender could potentially check the credit rating of your friends on Facebook. The average credit rating of your friends would need to be at least a minimum credit score, or your loan may not be approved. It is still unclear if Facebook will be using this part of the patent and how it could affect those applying for loans.
While at the moment this only applies to individuals and personal loans, it might be a concern for business owners looking to obtain capital down the road. It can already be difficult to obtain traditional loans for business owners, and this patent may make it even harder, if lenders start using it for loans across the board. Some lenders may already use your D&B® scores and ratings to help determine whether or not they feel your business is credible enough, based on their internal requirements, to receive a loan and under what terms and conditions. The scores and ratings are based around a variety of business related factors, including business history, payment habits, and industry norms. The idea that business owners’ ability to secure a loan might be based on his/her friends’ credit history could be terrifying and seem a little unfair.
In the meantime, if you’re thinking about applying for a business loan, or if you have applied and been denied, you may want to consider taking actions to help improve your business’s credibility. Here are a few things you can do to help:
1. Separate Your Personal Credit from Your Business Credit
If your personal credit and your business credit are intertwined they might affect one another. This could prevent you from getting loans, or your business expenses could damage your personal credit. As soon as you can, consider establishing a line of business credit, to not only help protect your personal credit score, but to also help your business build its own credit for future use. The video below covers differences between personal and business credit.
2. Build and Monitor Your Business Credit Profile
Once you’ve established a line of credit for your business, you should consider building and monitoring your business credit profile. Since companies and lenders may often pull your business credit report to see if you pay your bills and employees on time, as well as other things, like your PAYDEX score, it can be very important to build and monitor your business credit profile. Consider adding trade references* and payment histories to help establish your credibility.
Here’s a full article on How to Build Business Credit for more specific instructions.
3. Get Certified
If you are a women-owned, Veteran-owned or minority-owned business, you may be able to get your business certified, and this could help you get access to loans that are specifically set aside for these types of businesses. Getting certified may also help you appear more credible to lenders because they will be able to see that you have already meet certain qualifications required for certification.
You can also learn what traditional lenders may be looking for in a loan candidate, but if you just aren’t in the best position to get a traditional loan, you may want to consider alternative financing, like crowdfunding, online lenders, or these other options.
Photo Credit: Dimitris Kalogeropoylos, Flickr
*Trade References will be added subject to D&B® verification and acceptance. Please see http://www. dandb.com/glossary/trade-references/ for eligibility, process and other information regarding Trade References.