Most business owners wait too long before talking to their creditors.

By the time they make the call, suppliers are threatening liens, lenders are talking about legal action, and everyone has stopped trusting each other.

That's unfortunate because, in my experience, the best negotiations happen long before lawyers become involved.

After more than 25 years working on distressed real estate projects, founder-led businesses, and large financial restructurings, I've learned something that surprises many owners.

Negotiating with creditors isn't really about money. It's about understanding incentives, preserving trust, and keeping as many options alive as possible.

Don't Wait Until Everyone Is Angry

One of the biggest mistakes I see is waiting. Owners tell themselves they'll call creditors after they solve the problem. Unfortunately, that usually makes the situation worse.

The earlier you start communicating, the more flexibility everyone has. Once liens are filed and lawsuits begin, your options shrink dramatically. You can still negotiate, but you're doing it from a much weaker position.

One of my guiding principles is simple: preserve optionality.

  • –Every lawsuit reduces your options.
  • –Every lien reduces your options.
  • –Every relationship that breaks down reduces your options.

The earlier you begin the conversation, the more paths forward usually exist.

Every Creditor Wants Something Different

One mistake owners often make is treating every creditor the same. They're not.

  • –Banks have different objectives than private lenders.
  • –Suppliers think differently than trades.
  • –Government agencies have different priorities than both.

Even two suppliers in the same industry may respond completely differently. Some want certainty. Some want cash. Some simply want honest communication. Some are willing to wait if they believe they're eventually going to be paid. Others will move immediately toward legal action.

The first question I ask isn't: "How do I negotiate?" It's: "What does this particular creditor actually want?" Understanding that changes the entire conversation.

Cash Isn't The Only Currency

One of the most valuable lessons I learned came during a major restructuring project. Cash was almost nonexistent. Our shareholders weren't contributing additional capital. The company owned land and had a few strategic assets, but very little working capital.

At one point, the local fire department required winter access to several large buildings. Hiring a contractor to keep the roads cleared wasn't financially possible. Instead, I approached a local construction company.

They needed storage space. We had empty buildings. We agreed that they could use part of the buildings for storage in exchange for maintaining the roads throughout the winter. No cash changed hands. Everyone got what they needed.

Later, those same buildings had to be removed to make way for future development. The demolition cost was estimated at approximately $2 million. Again, there wasn't any money.

Instead of paying to demolish them, we reached agreements with several local farming co-ops. They dismantled the buildings, transported them to their own properties, and rebuilt them there. Their payment was the buildings themselves. Our payment was avoiding a massive demolition bill.

The lesson was simple. Cash isn't the only currency.

  • –Time.
  • –Assets.
  • –Future business.
  • –Storage space.
  • –Land.
  • –Certainty.

Sometimes those become far more valuable than cash itself.

Understand The Real Cost Behind An Invoice

Most owners look at an invoice and see one number. I look at what's behind it.

Every contractor has real costs: labour, materials, equipment — and then there's profit. Many suppliers would obviously prefer to be paid in full. But most would rather recover their costs and move on than spend months or years in court hoping for a better outcome.

That doesn't mean asking everyone to take a loss. It means understanding where flexibility may actually exist.

Negotiation begins by understanding the other person's economics, not just your own.

Relationships Matter Long Before The Crisis

One lesson I've learned repeatedly is this: trust is built before you need it.

Years ago, I made a habit of visiting my larger suppliers in person every month. Over time I got to know the various receivables managers. When financial problems eventually started developing elsewhere in my business, one of them called me directly.

She had heard rumours. She wanted to know if there was something she should be worried about. Because we already had a relationship built on honesty, we were able to have an open conversation.

The same thing happened with another supplier. When concerns began circulating, the owner called me personally. Rather than pretending everything was fine, I told him honestly that it would be best to remove his crew and materials from one of my projects until I had sorted out several issues.

He appreciated the honesty. He didn't rush to file a lien. Goodwill bought time.

Relationships are business assets. Treat them that way.

Fairness Often Buys More Time Than Money

Suppose you have six creditors. You don't have enough cash to pay everyone.

Many owners make one creditor completely whole while paying nothing to the others. I've generally preferred a different approach.

If possible, I spread available cash proportionately. Nobody is thrilled. But everyone sees that they're being treated fairly.

Then I explain exactly what happens next. When will the next payment likely occur? What milestones need to happen first? What is my actual plan?

Some creditors will still refuse. Some will sue. Some may file liens. That's understandable — you can't control every outcome.

But treating people fairly often preserves relationships that would otherwise be lost.

Sometimes People Need To Be Heard First

One of the most valuable negotiation lessons I ever learned happened during a major restructuring. The previous management team had promised creditors many things that never materialized. By the time I became involved, those creditors were furious.

I invited each group individually to meet, believing we'd immediately begin working toward a solution. I couldn't have been more wrong.

They didn't want to negotiate. Not yet. They wanted someone to listen. They wanted to explain why they felt betrayed. They wanted accountability.

I barely spoke during those first meetings. I listened patiently. The real negotiations didn't begin until the second meeting.

Only after people felt heard did trust begin returning. Sometimes the first negotiation isn't about money. It's about emotion.

Banks And Private Lenders Think Differently

Institutional lenders and private lenders often behave very differently.

  • –Large banks typically move more slowly — processes are formal, there are committees, letters, internal approvals.
  • –Private lenders often move much faster — weeks instead of months.

Neither approach is inherently better. They're simply different.

What both groups have in common is this: they stop listening when they believe you're no longer credible.

Promise only what you know you can deliver. Then exceed those promises. Underpromise. Overdeliver. That's how credibility is built.

Don't Let Ego Control The Negotiation

I've seen deals fail because people became more interested in winning than solving the problem. Negotiations become personal. Positions harden. Egos take over. That's rarely productive.

My approach has always been different. I try to understand what motivates the other side. What's the minimum outcome they need to accept? Can we create a solution where nobody gets everything they wanted, but nobody gets hurt more than necessary?

That mindset has solved problems that initially appeared impossible.

The Darcy Principle

The goal of negotiating with creditors isn't to "beat" them. It's to preserve relationships, maintain credibility, and keep enough options alive long enough for the business to recover.

  • –Start communicating early.
  • –Understand each creditor's incentives.
  • –Look beyond cash.
  • –Be honest.
  • –Treat people fairly.
  • –Deliver on your commitments.

Most importantly, remember that trust is one of the most valuable assets a business owns. Once it's lost, negotiations become much harder.