I mean they really could have just said "hey, we found a pile of the swords". That would have lowered suspicion and been more true. Plus they have the only one that matters. Actually if they said there were a bunch then it wouldn't have been weird to ask to ke one (so they could walk around and use theirs). That just seems like such an obvious better lie than the one they came up with. As is they're now in danger if the guild ever realizes they have the sword or happen to see it (meaning they can't use it in a dangerous situation if the guild is around).
Also they probably should have established a backstory for the swords human form beforehand. And given him some tips on common sense and acting like a human boy. These guys are REALLY bad at planning and lying