314 CHAPTER 12 GETTING IT APPROVED
Remember that life is a two-way street and you have to exercise due diligence before
accepting money from a stranger. Make sure that you do not unwittingly help to launder
drug money or other illegally obtained funds. Unless you are dealing with a well-known
and reputable company, you should take up your own references and keep them safely
on file. You do not want funding at any cost. This goes for extortionate funding as well,
which brings us to the contract.
The contract
Experienced and professional lenders and investors will want to use their own legal
agreements setting out the terms of the funding, security and repayment if appropriate,
and obligations on both parties.
Newcomers to the game – including but not limited to family, friends and angels – usu-
ally go over the top. Often, they retain a lawyer who has not done this before either, who
attempts to earn a fat fee by drafting the world’s longest agreement. Try to keep it short
and simple (as well as professional and legally effective).
Make absolutely sure that you review any agreement before signing. Check that the
terms and conditions are acceptable. Almost certainly have a trained corporate-finance
lawyer make sure that there are no traps. Just occasionally, unscrupulous investors delib-
erately strangle a company’s cash flow to force non-compliance with deadlines, and then
wrest ownership from the people who did all the work. Do not be caught in this way.
Never be bamboozled into signing. I have heard sign now on these terms or we walk away.
No legitimate and honest financier or investor would ask this. I have also seen entrepre-
neurs desperate enough to sign anything because they were so exhausted by the funding
process. Hang on to your business prowess and common sense.
Once signed, the agreement will quietly fade to yellow in a filing cabinet somewhere.
You will only refer to it after signing if there is some conflict. If your relationship with your
creditor or investor has sunk to the point where you need to rely on the small print, you
can be sure that things will get nasty. Make sure that it is acceptable today, before you
sign, while you are all good friends.
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