As a company manager, your main concern is to ensure that the business turns profitable. However, sometimes, you may be unable to reach your revenue goals due to various challenges. Internal and external factors can lead to various problems in your company and lead it to accumulate huge debts.
There are various options you can pursue to get your organization on the path to financial recovery. One of the options you can consider is a Company Voluntary Arrangement (CVA). Through this arrangement, you organization can be able to pay off its debt over a fixed period of time. A CVA also gives you an opportunity to carry out structural changes in your business to strengthen its operations.
Like is the case with all financial restructuring options, it is important to consult a financial advisor before implementing a CVA. The advisor will help you understand the impact that the CVA will have on your business. It is crucial to know the pros and cons of a CAV to determine whether it is a suitable arrangement for your company.
Three of the main advantages of CVA include:
i) The management remains in charge
Sometimes, the company’s management style may have contributed to the financial woes. However, despite this, the management can play an important role in making the CVA successful. You will need the directors to ensure the continuity of the business processes as the restructuring is going on. Since the top directors know the “ins” and “outs” of the organization, their support will be critical. When the management is retained and a professional financial advisor brought on bought, the chances of the organization overcoming its financial problems increase.
ii) Lower costs
High costs can impede your company’s quest to get back on its feet financially. Setting up a CVA as well as maintaining it is significantly affordable compared to other insolvency options such as liquidation and receivership. With a CVA, no large cash sums are required to purchase business assets, as a pre-pack administration requires.
There are some fees you will have to pay, for example, for meeting with the creditors. However, most of the costs you will incur would be deducted from the monthly payment premiums that would be agreed between the company and its creditors. This means your business will have more cash flow and working capital.
iii) Keep the financial issues private
The public nature of insolvency can affect your organization’s efforts for recovery. On the flipside, CVAs do not have to know by the public. For example, the process does not have to be indicated in the company’s communications.
The above are three main benefits of a Company Voluntary Arrangement (CVA).