Put yourself in the shoes of an investor. Someone asks you for money after their company hasn't been doing that great. You think here is potential, but you think there's a chance you'll lose some/all your money. So you provide the cash with the stipulation that any sale means your cash comes back first.

The alternative is for the company to tank and the founders - who tanked the company - walk away with your money. That is completely wrong.

Founders don't accept deals for money which are bad for them if they don't need it. You need money, you get the terms.

Same goes if you lose a house by default and then go and ask for money for another house. The subsequent mortgage is going to be at terms significantly less desirable than you may have got on your first try.

Failing companies create no winners.