Business debt consolidation is more common than people realize. UK Companies could also consider applying for a Business Debt Consolidation Loan.
Here are the details you need to know about business debt consolidation.
If an unexpected economic situation arises which drastically affects a UK business and may find they have amassed a huge amount of debt in a short period of time, then they could also consider a business debt consolidation loan.
There are a few informal or formal avenues that can help to sort out any business debt issues.
The first step would be to find a recommended financial expert who could provide some sound debt consolidation advice.
A business could consider a company voluntary arrangement (CVA), which is a business debt consolidation solution for Ltd companies. It’s very similar to the process when applying for an Individual Voluntary Arrangement (IVA) when applying for insolvency on a personal basis.
A business could have a part of their debts written off by one or maybe some more of their creditors, but in essence, it’s mainly a deal made between the business and these creditors whereby the business is given some more time to pay-off their debts. A bit of breathing space.
There is no obligation to accept smaller amount to pay-off, but it’s always worth considering because a creditor knows it may receive more money in the long-term if the business was possibly forced into liquidation.
A supervisor, which is an insolvency practitioner, administrates the CVA, but ultimately, the arrangement is between the creditors and the business direct.
The CVA supervisor just acts as a conduit and oversees the business debt consolidation, the existing management structure of the business remains in place.
Does this actually work for your company?
If your business debt is a result of a lot of incidents which you’d consider a one-time issue, then CVAs are possibly the best route to head for debt assistance.
Company directors can stop any company liquidation and bankruptcy and remain active and fluid, if you keep to the agreed terms of the business debt consolidation arrangement.
A business can look towards being debt-free within 5 years. Interest can be frozen and no further interest charged during this CVA period to help the business pay-off the existing loan. Up to 75% of a business’ unsecured debt can be eliminated via a CVA.
A Creditor Voluntary Liquidation (CVL) is an alternative type of business debt consolidation, which many counselling agencies will probably recommend. Parties who are legally entitled to company assets can identify and distribute assets in a liquidation process.
When liquidation happens, the company is dissolved. The CVL is a resolution agreed by the company shareholders. It’s considered voluntary, like in its name, and when a company gets to this point, it’s too far to consider a debt consolidation loan. It’s pretty much insolvent and is unable to repay in full any outstanding debts.
Unfortunately, the economic recession has forced quite a few UK business into a CVL. It’s the last thing any business shareholder or director would like to hear. A liquidator is nominated to head the CVL business debt consolidation arrangements.
The liquidator will call a meeting of the creditors to investigate the insolvency claims of the directors. These creditors formally appoint the liquidator. The liquidator may then form a committee to watch the activities of this individual.
The duties of the liquidator to instigate the business debt consolidation is to include converting business assets to cash, investigate and report on the conduct of the company directors, determining how much the company owes and making payments to creditors.