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Perception barriers

If lenders, investors, and sustainable entrepreneurs are to do business together, they must have a shared perception about each others' interests and practices.

Most environmental companies seem to know little about the investment community. Some are unaware of the difference between debt and equity and, in the case of debt, fail to understand that banks and other lenders are risk-averse and will not lend unless the loan is fully secured.

Financial institutions are not the favourite organizations for the SME. Many companies have horror stories about unsympathetic and arbitrary loan managers, staff changes, credit lines slashed or pulled, loans called, and intentions misunderstood.

Many entrepreneurs believe that investors are uninterested in sharing risk or being partners in their enterprises; that they lack appreciation for emerging markets; and that the do not take the time to listen.

For their part, many investors believe that environmental entrepreneurs lack knowledge about the realities of capital markets; use financing and investment rationales that emphasize societal or emotional appeals rather than straight business thinking; and fail to grasp the investor's interests.

These perceptions, whether or not they are justified, are an obstacle to placing and obtaining capital. Leaping over perceptual barriers requires the entrepreneur to have an appreciation of investors' interests. This can improve the quality of any presentation made to capital markets, and enhance the likelihood of success.

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