The leverage of pressing creditors
Does the business you are considering buying have any pressing creditors? In this short video, Jonathan Jay, founder of The Dealmaker’s Academy, explains why getting this information early on is so important.
- What pressing creditors are and what that will mean to your deal
- The most common creditor
- How to use the information about creditors as leverage in your negotiations
Prefer to read this? Here’s the transcript:
Hi, this is Jonathan Jay from The DealMaker’s Academy.
Welcome to today’s tip which is all about finding out from the seller whether there any pressing creditors.
So a pressing creditor is someone that the seller owes money to and who is demanding payment and it’s getting serious.
They’ve been fobbed off for a while and it’s now got to the point where payment needs to made. And usually, it’s a HMRC tax issue.
They haven’t paid their VAT.
They’ve gotten away with it for a few weeks, maybe a few months, and it’s, the pressure is building up.
Now why do you want to know this?
You want to know this because that is part of your leverage in a negotiation.
You want to find out whether by solving that one problem you make all their pain go away.
And there are ways to solve this problem after you’ve bought the business that don’t involve spending your own money.
But finding out if there are pressing creditors is a great question to ask, not on the phone, that’s way too early, but when you’ve built rapport, when you have built your relationship, because it gives you the information and the knowledge that you need to be able to craft an offer that helps the seller get what they want.