#39 Why Deals Fail to Close

How to Raise Money Podcast

In this episode, Ray McLennan discusses reasons why deals fail to close. He brings this topic up because according to him, there seems to be a proliferation of deals that should have closed over the last few months but they were left on the table. Learn why some deals close while others don’t and hear the techniques you can use to get your deal over the line. Ray discusses experiences with several people/investors and angels from different walks of life and comes up with the 7 reasons why deals fail to close and today he shares them with you. KEY TAKEAWAYS Not a big enough deposit. Deals fail to close because the angel investors want to do a loan and then the lenders at the commercial rates don't want you to have too many loans because they think it's overexposed, they want to see you with more skin in the game. And the more skin you can put into the game, the happier they are and the more comfortable they are. You may not have enough money for you to close the deal. Planning. Planning has not been granted or planning has been granted but there are too many owners clauses or planning has been granted but the number of units that you wanted to have is lower, and therefore it doesn't stack up on the back end. Planning may have been rejected or it may have been approved, but with amendments, and that can sometimes scupper a deal and cause a deal to fail. Lack of experience. This has gone up from, say, 14% to about 30%. That's more than doubled the number of cases where lack of experience has kicked in. The answer to this is to get in bed with somebody who has the experience and learn their ways. The vendor pulls out known as gazumping. A vendor pulls out due to some reasons and this eventually causes a deal not to close. You have agreed with your vendors and up until the last minute is when the vendor decides to pull out and this automatically leads cause a deal not to close. Terms are too onerous. A commercial lender, an angel investor or an institutional investor, whatever kind of investor, they'll agree in principle, you get a decision in principle that they're going to fund your exercise, and then they will send you some terms. When you look at the small print of those terms, what it says is that they can change it at any time and they can do that because they can. Exit uncertainty. An example is you create 25 apartments and then I'm going to sell those apartments and we're going to get out now. In an ideal world, that's what would happen. Actually, what really happens in reality is you're not going to sell all the flats, you're going to sell half of them, you may get a flurry of activity which really does buy you up and you go to the lender and you see so much interest in this site, its prime location, everybody wants to buy a flat here, a house here a property there will have no problem selling these apartments, these plants, these houses because the demand is so high, so you fail to sell off the apartments and then the buyers you thought could buy at a higher price fails to buy. Uncertainty makes people uncertain in that they will not commit and you want people to commit. Uncertainty breeds fear. Brexit uncertainty. How bad is it going to be? How good is it going to be? The answer is nobody really knows. BEST MOMENTS “In terms of percentages, not a big enough deposit, we've seen that increase from say 20% deals to now about 50% deals, that's quite a jump and that's one of the reasons why it's number one mentioned on here. In terms of planning, we've seen that go from say 20% to 21%, it's only a very slight increase.” “Uncertainty breeds fear.” VALUABLE RESOURCES Website (https://westrycapital.co.uk) Website (https://becomeanangel.com) ABOUT THE HOST Ray McLennan is the best advisor there could be on matters on why deals fail to close and he'll give you advice on what you should do in order to close all of your deals and believe me when I say that you will go home as a happy client a