Don’t Rush Into Accepting Terms on a Funder’s Template: You Can and Should Negotiate

Getting funding for your business can feel like a breakthrough moment, especially if it’s been a long road of pitching, rejection, and bootstrapping. So when a funder finally shows interest and sends over their agreement, it’s easy to want to sign and get moving. But whether it’s a loan or an equity deal, it’s important to slow down and look at what you’re agreeing to. Just because the document looks official doesn’t mean it can’t or shouldn’t be negotiated.

If it’s a loan, funders often use the same templates over and over. These templates are usually structured to reduce their risk, not yours. You might see terms around high interest rates, tight repayment schedules, default clauses that give them broad powers, or security arrangements that put your assets or personal guarantees on the line. None of these things are necessarily illegal, but they might not make sense for your business depending on your stage, your revenue model, or your cash flow cycles. And if they don’t make sense, you can negotiate. You can ask for more flexible terms. You can query the penalties. You can ask them to remove or water down clauses that feel one-sided.

With equity funding, the stakes are different but just as serious. You’re not just borrowing money, but you’re giving away a piece of your business. The terms in a share subscription agreement or shareholder agreement are often far more complex than they first appear. Some funders might want special voting rights, veto powers, or guaranteed board seats. Others may include rights that allow them to block your next funding round or force you to sell under certain conditions. Again, many of these terms come from standard templates that assume the funder has the upper hand. But you have the right to push back. You don’t have to agree to founder-unfriendly terms just because the person writing the cheque seems more experienced.

Negotiating doesn’t make you greedy or difficult. It makes you careful. It shows that you understand the long game. You’re not just taking money, you’re entering a binding relationship that will affect your business decisions in the future. Sometimes you’ll need a lawyer to help you unpack what’s being asked of you, especially when it comes to shareholder rights, dilution, exit clauses or decision-making powers.

Bottom line? Don’t rush. Don’t assume the template is the final word. Ask questions. Get advice. And make sure that whatever you sign helps your business grow without tying your hands down the line.

The StartUp Legal offers expert legal services tailored for SMEs, helping you secure a winning edge. For personalized support, book a complimentary consultation: https://calendar.app.google/thxigR9yhDAu4LP86 or email us at hello@thestartuplegal.co.za.