Need Credibility with Private Investors? Try Your Credit

Credibility is a key element in getting and using other people's money (OPM). If your investor doesn't perceive that you can do what you are proposing, they won't fork over the dough. If you establish strong credibility from the start, you'll have far few objections (if any) to overcome.

There are several ways you can build credibility with your private investors, such as showing them past deals or financial performance of your company. One thing that worked particularly well for me when I was first raising private money to buy income properties was to take a page out of the banker's handbook - and provide my prospective private investor with a copy of my personal credit report.

If you don't have good credit, don't worry. You can still get as much private money as you want, but think about getting your credit back up into pristine status so you have one more tool in your bag.

At the time I first started raising capital, I was long on good credit and short on my own capital. I thought that providing my prospective investor with a copy of my credit report (downloaded from experian.com or directly from one of the three credit bureau websites) would be a good way to demonstrate my credit worthiness. After all, I was borrowing money from them in the form of a private money loan, so why not show that I was a good borrower?

It worked.

Sometimes the most simple solutions are the most effective.

By providing a copy of my personal credit report, I was able to show the investor that I 'had nothing to hide' and wasn't afraid to bear everything in front of them. Both of these are good characteristics to show your investors - it helps them trust you.

Another thing you can use your personal credit for is to demonstrate to your investors that you pay your bills on time and that you have been responsible when others have extended credit to you. Many people know (including your investors) that banks and other financial institutions rely heavily on and report to the credit bureaus. if you have a home mortgage or other investment properties financed in your own name on your credit report, the investor can surmise that others have given you credit ("well, they passed muster with a bank, and the banks know what they're doing when it comes to making loans...")

Equally as important as using your credit to build credibility with private investors is how you present it to them. I advise combining all of the documents you will present to your private investors into a folder or portfolio. When meeting with investors, bring out your credit report after you show them some materials about your company and other background information on you. You don't want to lead with your credit report - this just creates awkwardness.

If you have decent credit, chances are you have managed yourself well and navigated the financial minefield effectively. This in and of itself demonstrates something strong to the investor. Use it to your advantage if you can. You can never have too much firepower behind you when raising private money.