Is a CVA (Company Voluntary Arrangement) the right choice for you?

Do you understand the implications of a CVA?

If your business is struggling you may have considered moving forward with a Company Voluntary Arrangement (CVA), this is often a suitable choice for Directors and can help a business get out of a sticky situation but sometimes it may not be the best choice for you.

Therefore it is important that you understand all of the implications that come with a CVA and the likely consequences that may affect your future trading capability.

Disadvantages of a CVA…

  • Creditors/ suppliers may begin to require cash upfront
  • Some suppliers may try to increase their prices, or re-negotiate credit terms voiding previous agreed discounts in an attempt to regain debts owed to them.
  • A creditor owed 25% or more of the debt may be able to dictate terms limiting what may be available to you
  • It effects the company’s credit rating
  • It does not bind secured lenders
  • A CVA will only work if the company is inherently profitable
  • It can take time to achieve. CVAs will run for 3-5 years
  • At least 75% by value of creditors have to agree
  • Companies operating under a CVA may be issued a VAT bond by HMRC. This is where VAT has to be paid up-front, causing cash-flow problems for businesses and often leading to the need for specialist loans.
  • Many Directors who had previously paid themselves by way of a dividend payment can no longer do this; thereby significantly impacting on their personal tax liabilities.

Other options that may be available…

At Ideal Corporate Solutions we offer a number of business finance solutions which could provide an alternative solution to a CVA. Depending on your situation you could apply for one of the following:

Invoice Finance
Asset Finance
Business Loans
Bridging Finance & Credit Lines

If you would like more information on CVA’s or other options that may be available to help your business contact the team at ICS today on 0800 731 2466