Here is a very simple rule that applies to each and every business as far as external sources of finances are concerned – be prepared to lose control over your business if you are going to involve a third party’s money. This rule is equally true for commercial banks as well as venture capital or strategic investments.
The form of loss of control may differ from one transaction to another. However, never expect that you can use money that belongs to others for your business without giving anything in return.
Most individuals are prepared to pay the interest required on the loan to keep the bank quiet. However, if you are taking a loan for a specific capital expenditure transaction, you will have to submit bill and other documents that prove that you have indeed finalized the purchase. Even then, paying excessively high amount to the vendor is going to raise eyebrows.
If you use your own money, you can pay as much or as little as you want without any complications. Do not expect such a smooth ride when you involve third party finances.
If you are planning on a sudden and drastic change in the nature of your business, your lender may insists on repayment of the loan full before you proceed. All regulatory changes to the basic documents of your corporation will be affected until you agree to such a deal.
The lender is completely entitled to restrict changes to your business that affects its business prospects and security of the loan. Rather than cribbing about it, you should plan for this as early as possible and incorporate it as a part of your business when you are borrowing money from others.