CVA for SME’s: a route to recovery?

Over 2 million UK SMEs have taken out state-backed loans since the onset of the pandemic. Many will shortly be facing their first repayments, as the Treasury has been picking up interest payments until now. With numerous firms showing early signs of insolvency, could a CVA be the answer for distressed SMEs?

Burden of debt

According to the Office for Budget Responsibility (OBR), 40.4% of SMEs that tapped into Government-backed loans will default. Undoubtedly, BBL and CBIL loans have helped more than a million businesses access the emergency funds. Yet, the maximum of 25% of annual turnover allowed by BBL in many cases didn’t cover 12 months of poor or zero trading.

Insolvency doesn’t necessarily mean the end of the road

Viable businesses showing early signs of insolvency are urged to seek help early to resolve their financial problems.

Businesses that are not able to stay on top of their financial obligations are at risk of being wound up or forced into liquidation. However, with the right advice, SMEs owners can get their businesses back on track.

CVA and business survival

There are a number of solutions and strategies that can be used to support business survival. These may include: Time to Pay schemes to Capital Release, Turnaround Financing to Administration or Company Voluntary Arrangements.

Company Voluntary Arrangements (CVA), so widely used on the High Street, may allow businesses to renegotiate the terms of their debt with creditors. There is no minimum or maximum term for a CVA – it could be for six months or five years, and there is no minimum or maximum amount – it is what the Company can afford to pay.

To find out more, download our insolvency decision-making flowchart or contact us on 0800 118 2948.

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