How to Manage Your Lender Relationship After Closing

After you close your capital raise, it’s time to manage your fresh funds and new obligations responsibly. How you handle this period is especially critical because performance and reporting are significantly more important to lenders than to VCs. 

Prioritizing compliance could be the best action to preserve your business as it continues to grow because it helps ensure your lender will not act adversely toward you and will not take steps that could potentially shutter your business. 

Do not worry: the availability of non-dilutive, scalable capital still vastly outweighs the added resources and discipline needed to take on said debt. And, in fact, the act of doing this may be a welcome jolt to your company (regardless of stage), as most lenders will expect a high degree of fidelity when it comes to reporting (i.e., it will whip your finance, product, and back-end data teams into shape if they weren’t already). 

In this section, we’ll discuss what happens after you secure funding meeting your reporting requirements, staying in compliance with the loan terms, using the debt effectively to grow, and avoiding common pitfalls. We’ll also highlight key metrics you should track to ensure you’re staying on track and mitigating financial risks. Finally, we’ll see how Arc’s cash management tools can support you in this ongoing phase.

Understanding post-close reporting requirements and lender expectations

All lenders require periodic reporting after funding, though the level of detail will vary depending on the type of debt you raise. You may be asked to report information such as:
 

• Financial statements: At a minimum, most lenders want to see monthly, unaudited financial statements (P&L, balance sheet, cash flow). Be sure you or your finance team have a process to close the books and produce these on time. Even if you are an early-stage company, a lender may require you to begin generating audited annual financial statements after a certain period of time (e.g., 1-2 years), and if you are a later-stage company (Series ~B and above), this will almost certainly be a requirement.
• Compliance certificate: If you have financial covenants, your company’s CEO or CFO must sign a compliance certificate each reporting period (typically monthly). This document states that you are in compliance with all covenants and, if you are not in compliance, discloses any defaults.
• Representations & Warranties: Tied to the above, you also may be required to rep & warrant during each reporting period that you are in compliance with all affirmative and negative covenants. This is just a legal way of saying that your business is continuing to do everything it is supposed to, and not straying outside the bounds of what you conveyed to the lender during diligence. Some examples of these covenants include (but are not limited to) unauthorized M&A, transactions with affiliates outside the normal course of business, amendments to material organizational documents, being in good standing with local laws and regulations, and maintaining the proper types of insurance.
• KPIs or other metrics: Some venture lenders request regular updates on metrics like ARR, customer count, or runway, especially if those were part of how they underwrote the deal. If not explicitly required, it can still be nice to voluntarily share some highlights in your communications, which keeps the lender engaged and confident.
• Transaction Data: If you are raising highly structured debt, e.g., asset-backed financing, then you will undoubtedly be required to provide highly detailed customer-level data going back over time. An example of this could be a “loan tape,” which contains monthly reports on each customer, including the status of their loan and any important characteristics related to their customer profile (stripped of PII). If you do raise this type of financing, it is extremely important that your data team be able to provide this information in the format the lender is looking for. Allocate the proper time during diligence to understand what the lender needs, why they need it, and how to ensure you are pulling and providing this data (via transfer or API) on a recurring cadence without it being overly burdensome to your team.
• Budget or financial plan: At year-end or the start of a new fiscal year, many lenders ask for your updated budget or projections for the coming year. This helps them see that you’re planning properly. Check if your loan requires an annual financial plan delivery a requirement common in venture debt deals.
• Other notices: Loan agreements often say you must promptly notify the lender of certain events (e.g., default under the agreement, any material adverse change, or big lawsuits. Practically, companies sometimes hesitate to share bad news but remember the lender is now your partner. If something concerning happens (like you realize you might miss a covenant next quarter), it’s better that you proactively address the issue.

From the lender’s perspective, these requirements are there for them to stay updated on their investment in you. It might feel like the lender has onerous requirements, but abiding by their information requests takes little time once you’ve built an internal process for generating their asks. 

Make sure to invest the proper resources in doing this upfront versus believing you can build these things on the fly after the debt facility closes. No one (including the lender) wants to be bogged down in an onerous, combative, frictional reporting process month after month…after month. Also, getting this reporting right at the outset will save you headaches down the line, as larger lenders are only more serious when it comes to compliance.

Aside from formal reporting, expect some level of relationship management. Good lenders will often schedule check-in calls periodically or even support you with guidance or customer introductions. Don’t shy away from the lender; by keeping them close, you make them an ally. If you ever need a favor, that goodwill can pay off.