With the recent rise in interest rates and a gloomy outlook forecasted for the UK economy, most business owners will have concerns about the future prospects for their businesses. If you find yourself in a position where your business is in financial difficulties that are likely to be temporary, then a CVA could be the answer to survival.
Financial difficulties can come arise from a number of sources, however the most common are cash flow issues and creditor demands. The latter can sometimes result in a winding up petition which threatens the very existence of your business.
One way a CVA can help is to reduce pressure from creditors so that the business has time to recover and return to a position where debts can be repaid. A CVA features in Part 1 of the Insolvency Act and can be used where a company has a sound underlying business.
Using a CVA to resolve issues often results in a win/win for the indebted business and creditors. Agreements often contain a commitment to paying off debts in smaller chunks which is sometimes better than nothing from a creditor’s perspective. If the business was to go bankrupt then it may result in a creditor not receiving anything from the company concerned.