A simple business recovery test could save you a lot of worry and a lot in administration costs, especially if it emerges that your business is a candidate for a CVA after a business recovery test. For businesses that have a realistic chance of recovery, after making a few subtle but strategic changes to logistics, operations and expenditure, Company Voluntary Arrangements create a lifeline for a business and give it a second chance, to repay its debts (usually over a five year tenure) while recovering sales and profits. For companies where insolvency is inevitable, administration may be required to protect the interests of company employees. Companies that just need help in improving their cash flow, factoring may provide the solution.

What is factoring?

Factoring is one way of improving cash flow for both small and large businesses, and gives company directors foresight into when they need to employ more intensive debt collection strategies or secure more credit. It is ideal for companies that need to improve their cash flow, saving them time and money during the debt collection process. Companies that find themselves in debt because of large, unpaid invoices usually benefit the most from factoring.

What is prepack administration?

Business restructuring that protects assets and the interests of employees during the insolvency process is referred to as prepack administration. Prepack administration enables assets to be sold off before formal insolvency takes place, in order to give a company more financial options. It also allows for once-off sales to compensate for, and recover from, unforeseen circumstances. This process also means that directors can regain full control over the business, without having to hand it over for administration.

What is a CVA?

Companies that have a chance of full recovery and want to avoid insolvency may benefit from a five year CVA, to improve their cash flow and work systematically at repaying outstanding debts. A CVA means that assets cannot be attached by creditors and pays off the total debt in smaller dividends, usually over a five year period. CVAs are meant to be affordable, and are the most effective way for viable companies to regain their momentum and rebuild themselves.

CVAs can strengthen and protect business relationships and can give companies a second chance at restoring their reputations. Companies are usually saved the expenses of VAT and tax while a CVA is in place and it can be used to eschew the costs of terminating leases and employment contracts with staff. A business recovery test is the most effective way to determine which approach will work best for your company’s circumstances.