Before visiting a local restaurants or businesses, it is not uncommon for consumers to look at social review websites, including Yelp, to preview the company. Ultimately, the reviews and ratings alter a decision in some way. Customers are not alone in scouting Main Street businesses. Today, alternative lenders such as Merchant Cash Advances are actually taking to the Internet to determine if small businesses are credit worthy. In fact, online reviews matter from a lending perspective.
Traditional lenders have and continue to reject a good majority of small business loan applications and have tightened their lending policies. Furthermore, they have lacked the technology to look at the whole health of a business and judge them solely based on credit score, a factor that shouldn’t reflect if they can repay a loan or not. To combat America’s lending challenges; many alternative lenders have cropped up in the past few years and are using technology and Big Data to efficiently deploy capital to small and mid-sized businesses.
As any business owner knows, the ability to successfully access capital is part and parcel of growing their business. While alternative lenders have found innovative ways to fund, they remain watchful and have found that online reviews have been considerably useful to screen and monitor candidates. Online reviews matter from a lending perspective for several reasons.
Below we’ve broken down a few ways American Finance Solutions (AFS) considers online reviews when deciding whether or not to provide small businesses with funding.
- Good reviews and ratings generally mean a business has a positive, continued cash flow because satisfied, repeat customers typically return.
- Organic good ratings translate to a lower new client acquisition cost for a business. Word of mouth advertising is one of the best forms of marketing. Positive reviews are especially beneficial and can boost sales. Generic advertisements, including print, online, broadcast and direct mail, as well as coupons and Groupon, are costly and many are finding they are hurting the business’ bottom line.
- Recent trends of ratings reveal the business’ strengths and weaknesses overtime. If reviews fluctuate, a company can pinpoint areas that need improvement short-term and long-term. For instance, if ratings are great for two years but suddenly decline, a business must evaluate the cause. Questions such as, ‘What change has occurred in business operations?’ and ‘Will the company be able to move past it?’ should be confronted.
- User photos and videos posted in reviews give decision makers a better understanding of the business. Consumer content brings a business more to life than a standard computer application or financial paperwork can. Pictures of a motel’s newly renovated bathrooms, including a before and after, are more telling than just stating that upgrades happened.
When a business is receiving positive feedback online, alternative lenders feel confident that the company is a great candidate for direct funding. Online reviews reveal how well a business is catering to customer needs and desires, which is indicative of a company’s future prosperity. Alternative lenders want confirmation that a company given direct funding has a great opportunity for success, which online reviews effectively tell.
Scott Griest is founder and chief executive officer of American Finance Solutions (AFS), one of the nation’s fastest growing merchant cash advances for small businesses. For more information, visit www.americanfinancesolutions.com.
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