Times have been hard for businesses. Many have faced a wide range of financial difficulties especially when it comes to raising additional finance. If your business is still experiencing severe cash flow problems and you cannot raise sufficient finance, it is imperative that you seek professional help without delay.
One possible solution is a Company Voluntary Arrangement (CVA) which allows a business to repay its unsecured liabilities by entering into a binding agreement with its creditors, detailing how its debts and liabilities will be dealt with. The basis of a CVA is to repay what the business can afford after restructuring or downsizing as required. This can result in either a part or a full payment to creditors over a period ranging from 2 – 5 years. Typically, once the company’s liability has been restructured, any monies generated or owed such as book debts or work in progress can be used as working capital rather than to pay old debts.
Commenting, Gerald Irwin of Sutton Coldfield based licensed insolvency practitioners and business advisers, Irwin Insolvency said, “A business with cash flow problems will be juggling every cheque it receives in an effort to stay within its overdraft limit, pay its creditors, maintain supply and pay overheads and salaries. In a CVA, however, current income and debtors’ payments can be used to take the company forward, whilst maintaining monthly repayments of old liabilities. This type of arrangement can provide a large injection of free and available new working capital.”
The key advantage of a CVA is that the directors are free to continue to run their business, the employees keep their jobs and creditors will be in a better position than if the company had gone into liquidation.