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If your business is fundamentally sound, but under very serious threat from creditors because of unpaid bills, perhaps you should consider a Company Voluntary Arrangement or CVA.
A CVA can be a really effective way of protecting your business when cash flow is tight. It gives you space to restructure your finances and turn things around, without worrying that someone you owe is going to take more serious action.
The CVA process can be started before, or during, other insolvency actions. The company finances do need to be in a bad way before a CVA can be begun – it’s not just a way of escaping from debts.
A CVA is an agreement between your company and its creditors that sets out how much you are going to pay them, and when you will pay them.
It begins when the company directors accept that the firm is insolvent and believe the business can continue profitably if the debts are dealt with. They must also accept that changes need to be made to the way the business is run.
Insolvency experts are then brought in to put together a proposal for a CVA, which is put before the creditors in a legal process. By now, the creditors will know there is a problem and will want to know whether the CVA is going to be the best way of getting at least some of their money back.
The creditors must vote on whether to accept the CVA, with three quarters (measured in terms of overall debt) being in favour. The company shareholders must also vote, with at least half agreeing to the arrangement.
If the CVA is approved by creditors and shareholders it becomes legally binding. Creditors cannot pursue any other actions to recover their money and the company must keep up with the payments agreed in the CVA.
Your business can run into financial difficulty for all sorts of reasons, and despite being well-run and profitable. Perhaps it’s still at the start-up phase and not yet generating much income, or is saddled with long-term commitments it can no longer afford.
A CVA allows your business to continue while solving these financial problems. Creditors like CVAs because they will get more money back than if the company were allowed to go into liquidation.
It can also be a good solution for employees, as many will probably keep their jobs. Your customers will benefit too, because they do not lose their supplier.
A CVA can be a great all-round solution to insolvency problems.
Getting a CVA in place is a great way to save your business, but it demands that you have the cash flow to continue trading.
Our speciality at Business Recovery is to help you find the funding that you need to get back on the road to success. Our experts have helped hundreds of firms raise working capital, often by introducing them to funders they had not previously considered.
If you are seeking working capital for your business, give the Business Recovery team a call right now on 0800 157 7355 for a free, no-obligation consultation.