Having bad credit does negatively affect your ability to get funding for a startup. It won’t be the only defining factor, but it does reflect negatively.
Picture it like this.
You just bought a car. You put 1,000 miles on it. You blow out your tire. Your tire isn’t covered under warranty. You go to the dealership and replace the tire. You call the vehicle manufacturer for reimbursement. The vehicle manufacturer knows you’re not under warranty. However, from their viewpoint, they are very close to a window. They could see right through it. They might make a decision to ensure customer satisfaction and take care of you.
Now, let’s picture things on another end. Your vehicle had a five year warranty. You have a seven year old vehicle. Your transmission blew out. You call the manufacturer seeking out assistance.
Now, the person on the other end is further from the window. Their decision is going to be based more on the answers that you provide.
Are you the original owner?
If you are, you may get them to see closer to the window. If you aren’t, maybe they might take a step back.
How many miles do you have?
Do you service your vehicle at the dealership?
Is this your first vehicle from that brand?
How many vehicles have you owned?
What kind of vehicle are you going to buy for your next means of transportation?
Does your family drive the same brand as you do?
Have you referred others to buy that specific brand?
How do you feel about that brand?
Based on your answers, the perspective changes. Should the person on the other end get closer to that window, or further away?
This doesn’t guarantee where you would end up at the end of the day, but it helps put things into perspective.
I’ve had bad credit for a few years, but it didn’t hinder my ability to raise money. I currently have a bankruptcy on my record, however if I went to my network to raise money for an idea, I’m quite certain I could get at least $250k in my first round of funding.
My network has seen what I have done before and how hard I work, so they know where the money is going and how useful it is in my hands, due to the experience I’ve had.
I’m also guaranteed an exit if I can get profits up to a certain level, by another high net worth individual in my personal network.
The only problem is that I don’t want any money to build a business.
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Originally posted on Quora.
Leonard Kim is Managing Partner at InfluenceTree. At InfluenceTree, Leonard and his team teach you how to build your (personal or business) brand, get featured in publications and growth hack your social media following.