CVA finance, and the four options worth weighing first.
A Company Voluntary Arrangement is a legally binding agreement between a company and its creditors to repay an agreed proportion of its debts over a fixed period, usually up to five years. The company keeps trading and the directors stay in control. It must be proposed through a licensed insolvency practitioner and approved by creditors holding at least 75% by value of the votes cast.
I am not a licensed insolvency practitioner and this is not insolvency advice. It is a plain explanation of the options, written by somebody who buys companies at the stage just before this one.
A CVA is one of five routes, not the only one.
Which applies to you is decided almost entirely by how much cash runway is left. With months, all five are open. With weeks, the informal ones are gone. That is the single strongest argument for looking at this early, and the reason most directors end up with fewer choices than they needed to have.
| Option | What it is | Main advantage | When it fits |
|---|---|---|---|
| Time to Pay | An agreed instalment plan with HMRC for arrears | Informal, quick, no court and no practitioner | The arrears are the only real problem |
| Refinancing | New or restructured facilities, often asset-backed | No insolvency process and no public record | The business is viable and has assets |
| CVA | A binding deal to repay creditors over up to five years | The company survives and trading continues | Viable business, unsustainable historic debt |
| Administration | A practitioner takes control to rescue or sell the business | A moratorium stops creditors immediately | Immediate pressure, and a business worth saving |
| Sale or investment | A buyer puts capital in and takes a stake | Debt is dealt with by growth rather than by process | Solvent, or close, and worth owning |
The first two are informal and need no practitioner. The middle two are formal insolvency procedures and legally require a licensed insolvency practitioner. The last is a commercial transaction, and it is the one I am involved in: capital in for a stake, with the debt dealt with through growth and funding rather than through a process.
Can you still raise money during a CVA?
Yes, but the options narrow and they change shape. Anything assessed on credit history closes. Anything secured on an asset usually stays open, because the lender is looking at the asset rather than at the arrangement.
The most available route during or after a CVA, because it is secured against debtors, stock or equipment rather than against credit history. Rates are higher than a bank facility and availability depends on the quality of your debtor book, not on the arrangement.
Releasing capital tied up in plant, vehicles and equipment you already own. Often overlooked, and frequently the fastest source of cash in a business that has been buying its assets outright for years.
Realistically closed while an arrangement is running, and difficult for some time after it completes. Applying repeatedly and being declined does further damage, so it is usually the wrong place to start.
The only route that puts money in without adding to the debt the company is already struggling to service. An investor buys a stake, the capital goes into the business rather than onto the balance sheet as a liability, and the recovery is funded rather than borrowed.
What a CVA actually costs you.
There are two nominee and supervisor fees, both paid out of the contributions rather than up front, and both set out in the proposal creditors vote on. Those are not usually the expensive part.
Suppliers tighten terms, often to pro forma. Credit insurers withdraw cover, which can matter more than the suppliers do. Some customers hesitate, particularly on long contracts and public sector work where financial standing is assessed. How the situation is communicated to each group frequently matters more than the arrangement itself.
A CVA runs for up to five years and the contributions come out of trading profits every month for its whole term. That is money not going into vehicles, plant, people or growth. A business can complete an arrangement successfully and still emerge five years behind where it should have been.
The company survives, trading continues, employees stay employed on the same terms, and contracts generally continue. Compared with administration or liquidation that is a substantial amount to protect, and it is the reason the procedure exists.
The trading problem that created the debt. A CVA restructures history. If the margin, the working capital cycle and the management position are unchanged, the company arrives at the same place again with fewer options and less goodwill.
I am not an insolvency practitioner.
Insolvency is a licensed, regulated activity and I do not hold that licence. If your company is insolvent, or is heading there within weeks, you need a licensed practitioner and you need one now. Say so on a call and I will tell you that plainly rather than take up your time.
What I do is buy businesses at the stage just before that: underperforming, tired, carrying debt they are struggling with, but still viable and still worth owning. I acquire between 40 and 100%, put capital in as equity rather than as more borrowing, and fix the trading problem underneath the debt. Most owners keep a stake.
That route disappears as the cash runs down, which is the practical reason to have the conversation earlier than feels necessary. A business with three months of runway has options. The same business with three weeks has one.
CVAs, finance and the alternatives.
What is a CVA?
A Company Voluntary Arrangement is a legally binding agreement between a company and its creditors to repay an agreed proportion of its debts over a fixed period, usually up to five years. The company keeps trading and the directors stay in control. It has to be proposed through a licensed insolvency practitioner and approved by creditors holding at least 75% by value of the votes cast.
Does a CVA mean my company has failed?
No. A CVA is a rescue procedure, and it is only available to companies with a viable underlying business, because creditors will not approve one otherwise. It exists precisely because a company can be worth saving while carrying historic debt it cannot service. What it does mean is that the position is serious enough to need formal help, and that the window for informal options is closing.
Can you get finance during or after a CVA?
Yes, though it narrows. High street lenders will generally decline, but asset-backed lending against debtors, stock and equipment is often still available because it is secured on assets rather than on credit history. Invoice finance is the most common route. Equity investment is the other, and it is the only one that puts money in without adding to the debt the company is already struggling with.
What are the alternatives to a CVA?
Four, roughly in order of severity. A Time to Pay arrangement with HMRC if arrears are the only real issue. Refinancing, usually asset-backed, if the business is viable and has assets. A sale or an equity investment, which deals with the debt through capital and growth rather than through a formal process. And administration, if the pressure is immediate. Which one applies depends almost entirely on how much cash runway is left.
Do you provide insolvency advice?
No, and it is important to be clear about that. Insolvency is a licensed, regulated activity and I am not an insolvency practitioner. What I do is buy and invest in businesses that are underperforming but still viable, often before a formal process is needed at all. If your company needs a CVA or an administration, you need a licensed practitioner, and I will tell you that on the first call rather than take up your time.
How much does a CVA cost?
There are two costs: the nominee fee for preparing and proposing the arrangement, and the supervisor fee for running it across its term. Both are paid from the contributions the company makes into the arrangement rather than up front, and both are set out in the proposal creditors vote on. The larger cost is usually the commercial one, which is the effect on credit terms and on how suppliers and customers treat you.
What happens to staff and contracts in a CVA?
The company continues to trade, so employees remain employed on the same terms and contracts generally continue. That continuity is the entire point of the procedure and the main reason it is chosen over administration. In practice the real risk is commercial rather than legal: suppliers may tighten terms and some customers may hesitate, so how the situation is communicated matters as much as the arrangement itself.
If the position is not that advanced, the better starting point is the turnaround guide, which covers the stage where most of these problems are still straightforwardly fixable.
Tell me how much runway you have.
Roughly what the cash position looks like over the next eight weeks and what the pressure actually is. I will give you a straight read on whether this is a funding problem, a trading problem, or one that needs a licensed practitioner, and I will point you at one if it is.
Prefer to talk now? Call 020 3475 5475 or email lee@verdanicapital.co.uk.
Options narrow as the cash runs down.
Every route on this page is open to a company with months of runway. Most of them are closed to the same company with weeks. That is the only reason this page pushes you to have the conversation early.
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