If I had to boil down my lessons for entrepreneurs on how to deal with investors, it boils down to “put your self in their shoes.” What does the investor want from you in order to decide to invest? What does the investors want from you after making the investment?
For debt investments, the lender gave you money. That loan came with money and a schedule for repayments.
What does the lender want? Simple. They want the repayments, on the days specified in the schedule.
To get the loan you signed the load document and agreed to the repayment schedule. That wasn’t a rough outline of repayments. It specified specific amounts and specific dates.
Meanwhile, there are a constant stream of challenges at young companies. And growing companies. At all companies. Those of us who invest in young companies know that, at time, things will happen that make it impossible to meet the repayment schedule.
That is expected. What too many entrepreneurs don’t understand is that the schedule can be flexible, but only if they contact their lender well ahead of the repayment date. Not the day of. Not the week after. And absolutely not a month later.
What too many entrepreneurs also don’t understand is that future borrowing is contingent on repayments. You don’t get more money because something goes so wrong that you need more money. You get more money because you were good at communicating issues before payments were due, and ideally because you found a way to make repayments despite those unexpected challenges.
Which is why it is so frustrating as a lender when a company behind on its payments shares good news about a big sale, or big grant, or any big unplanned income, and yet no repayment arrives. Nothing. Not even a token $1,000 payment.
So again, to all borrowers out there. If you want more money (and I’ve yet to meet a young companies that didn’t), make payments on your loans. Whatever payments you can afford. As often as you can afford. Inching payment by payment back to repaying in full. Do that and you’ll find that lenders will lend you the money you need, lowering frustrations on both sides of the table.
