When it comes to business financing, the whole process is an interesting study on promise, commitment, and follow through on both the side of the borrower and the lender.
When lenders are prepared to issue a commitment, they provide a piece of boiler plat, pounded out by their lawyers, that a borrower can’t possibly comply with in an absolute sense with more out clauses built in than most hollywood prenups. The lender words everything in their favor and basically provides you with a take it or leave it proposal on all the crafted wording. Even if they are open to make changes, do you have the 30 to 60 days to wait to deal with the back and forth process between their legal counsel, head office and your lawyer?
Probably not. So are lenders hypocrites, preaching loan defaults on one hand and then causing them to happen on the other? Sure they are.
But what about the other side of the equation?
Many business owners will say just about anything to get the capital they’re looking for, especially if their in a real pinch. The prospects of things not working out are not an option and if things do go sideways sometime in the future, the business owner will deal with the problem when required.
Yet, when things do go south, the first thing the borrower does is to try and think up every conceivable strategy to get out from paying back the debt or having to go bankrupt or needing to liquidate other assets to repay the lender that was promised to be repaid… in writing.
Basically, both sides both talk out of both sides of their mouth.
Which is one of the main reasons the current financial markets are in such a mess.
The lesson here if any is that the process of borrowing and lending is very much a game where the rules can be changed by both sides all the time. Its also not for the faint of heart. So if you want to be a borrower or a lender, make sure you’re up for the risk that goes with it.
Sure, as individuals we are conditioned to take on debt to drive the economy…homes, cars, credit cards. But business credit takes risk to a different level, requiring much more savy and fortitude to properly play the game.
The old expression, “neither a borrower or lender be” has been around for a long time for good reason.
But the reality of business is that leverage is required to make the economy go round. So if you’re in business, you’re in this game.
The challenge right now is that most business owners don’t realize that this is a game due to the fact that we have had an unprecedented good run over the last few decades and they haven’t previously had to deal with things not going so well for an extended period of time.
So regardless of your personal moral fiber and commitment to do the right thing, understand that from the impact of the current recession the financial world has now changed and the probability of you as a business owner or lender being on the wrong side of someone else’s agenda are much higher.
Business financing is definitely both art and science. Its also a mix of good intentions and bad, unfortunate circumstances and fateful occurrence.
In the words of Andrew Grove, “only the paranoid survive”. its not about whether or not you’re a hypocrite or not any more regardless if you’re a borrower or lender. Its about how well you play the game.
As far as morals and ethics go, you should always be prepared to play fair… as long as everyone else does.