If you’re raising money through lending, here’s what the deal really looks like—and what both sides need to understand.
When you borrow money from an investor, you’re not giving up ownership. You’re giving them a promissory note. That note spells out everything:
• How much you borrowed
• The interest rate
• Any upfront points paid to close the deal
• The repayment schedule (monthly, quarterly, or a balloon payment)
• The term of the loan
For example, if you borrow $100,000, two points means you pay $2,000 upfront just to get the deal done. Then you may pay 10% interest annually, often paid monthly, with the principal due later.
But here’s the key part many people gloss over: security.
The lender isn’t just trusting a piece of paper. They usually want collateral, guarantees, or some form of protection so they’re not left holding a worthless note if things go sideways.
Lending is clean, predictable, and doesn’t dilute ownership—but it comes with fixed obligations and real consequences if payments aren’t made. That’s the tradeoff.
Understand the structure before you borrow. Lending is powerful, but only when it’s done the right way.
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