CVA costs???

[mids_biz_guy]

If a business had debts of £60k including inland revenue total creditors 7

What would be typically the costs of setting up and running the Cva?

Thanks

 

[Robert Moore]

The cost of going into a CVA depends on a number of things.

How aggressive the creditors are in terms of legal action. How many employees etc. £60k is really the lowest level of debt where a CVA, properly done I might add, is cost effective.

Our CVAs start at about £7500 + nominees fee of £3000.

Depending on circumstances you can write off about 60% of the debt. What is more the fees can often be paid out of savings in cashflow that a CVA proposal bring about. Others do it cheaper but they look for personal guarantees.... can be tricky if the business fails.

 

[Alan R Price]

If a business had debts of £60k including inland revenue total creditors 7

What would be typically the costs of setting up and running the Cva?

Thanks

One wonders whether the costs of a CVA would be justified for that level of debt. As Robert says, the cost is going to be at least £10,500. There are likely to be disbursements as well (statutory insurance premiums at the very least).

The main justification for a CVA would be that the issues that caused the insolvent position had been dealt with, or there was a plan in place to deal with them, so that the company did not get into the same position again. You would need to show that the company could be profitable, with positive cash-flow, out of which a monthly payment could be made to settle the company's debts. Alternatively you could introduce money from a remortgage, for example, to allow for a lump-sum payment in full and final settlement or in conjunction with contributions from future profits.

The other alternative to a CVA would be to identify the 3-4 largest creditors and see if you can negotiate longer-term settlement terms with them and keep the smaller ones happy with drip-fed payments when they shout too loudly. Even HMRC will usually consider a time-to-pay arrangement. It's not ideal but it often works. The thing to do is monitor the performance of the business closely and if you find things are getting out of control consider closing down or some other action to prevent the debts increasing.

Of course if the company is loss-making with little chance of recovering you should consider ceasing trading or selling the business as a going concern.

 

[Robert Moore]

Alan's advice is spot on. A CVA is really a last resort if the business can sort its problems and has a viable future and the cost is likely to be an issue at this level. Negotiation is the best way and as Alan says HMRC may well accept a time to pay.

Talk to the creditors. At the end of the day they dont want to lose a customer if they can help it