Benefits of a CVA for your business

Discussion in 'Articles & Tutorials' started by laura, Mar 29, 2011.

  1. laura

    laura
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    Sometimes in business and especially with cashflow it can be extemely difficult knowing what to do for the best this is where a lot of companies can fall into the trap of company liquidation. From experience it is always best to speak to someone and advice is free from the right company. The CVA (Company Voluntary Advice) procedure forms an agreement between your company and the creditors to repay an affordable dividend of the money owed over a fixed period of time. This can help to increase cash flow, allows the your company to continue to trade which is more important, and reduce the overall debt by a significant amount.
     
  2. za000in

    za000in
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    Due to the economic downturn, many high profile national and international companies from diverse sectors have entered well publicized liquidation, meaning business bankruptcy. But were you aware that business bankruptcy is not the only legal option? A business rescue service can support struggling companies and sole traders by explaining all the legally recognized routes to deal with serious business problems. This article explains one of the more popular legally recognized solutions, the Company Voluntary Agreement, or CVA for short. It explains a little about why they have gained popularity with UK firms; the advantages they bring; and how to gain professional support to see if one might suit your business needs.

    Why Might Companies Need A CVA?

    There are many reasons why more companies have faced very difficult trading in recent years. The effects of the economic downturn have been felt in many UK sectors, for example, the recent record levels of personal insolvencies may adversely affect consumer spending patterns in some sectors. There has certainly been some notable volatility in international markets, all of which can again produce serious adverse conditions for some UK based businesses. Finally, these problems have been accompanied by greater restrictions in the availability of business lending.

    The Ten Key Advantages of a CVA:

    1. Financially challenged businesses may be able to avoid business bankruptcy by entering into a CVA. It is essentially a legally binding agreement with creditors about the repayment of all or part of the business debts, spread over a fixed time scale. It therefore cannot be arranged purely in-house but is entirely manageable with support from a business rescue service.

    2. CVAs can be relatively flexible since they are created with direct input from the afflicted company's directors.

    3. In some cases, the managed repayment plan created by a CVA may be aiming to allow vital 'breathing space' in order for the company's finances to recover. In this sense, a CVA can offer a real rescue strategy by avoiding the finality of business bankruptcy.

    4. A CVA can avoid the stigma often associated with business bankruptcy. They are a more private option, with no names automatically seen in the papers - an advantage when aiming to avoid any negative publicity which could adversely affect trading

    5. Once agreed, a CVA prevents creditors from initiating any fresh legal action against your business.

    6. It is in general, an acceptable option among larger creditors and business banks.

    7. It will also create a manageable payment schedule for any crown tax arrears.

    8. A properly arranged CVA should cost less than either administration or business bankruptcy. You should be able to gain information on likely comparative costs from your business rescue service.

    9. Crucially the procedure avoids the need for any time-consuming formal investigation into your business accounts. This allows you more time to focus on your business activities, which is of course good for those businesses seeking turnaround.

    10. Finally, the company's directors can continue to receive a regular income as the company continues trading.

    A CVA would not suit every business facing financial challenges and it is vitally important to gain expert advice from a business rescue service to see if it is the best option for your business. If it would not, there are still a number of legal options that your advisor should discuss.
     

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