Just because a business is in trouble it doesn’t mean that the business is going to fail. Some businesses just need some time and breathing space in order to sort out their finances.
Voluntary Arrangements are an agreement with the businesses creditors that set out how the business is going to pay off its debts and over what time frames. The money to pay off the debts may come from many sources, including selling assets, cutting costs, or cash from future profits. What is important is that the business clearly communicates how it will pay off its creditors, and that the creditors are confident that they will eventually be paid, and that the business knows that it can continue to trade.
A voluntary arrangement is established in a court of law and it gives the business protection from an further legal action taken by the creditors for non-payment of debts, and it is an obligation by the business to make the payments where and when they can.
The main benefit of voluntary arrangements is that the business can continue to operate and remains in control of its financial situation.
How to arrange voluntary arrangements
In order to set up voluntary arrangements you need to get your creditors to agree to it. Unsecured creditors may be the most difficult to persuade because they have the most to lose if the business does go bankrupt, as they have no assets to sell off to regain their money.
In order to get creditors to agree, you will need a well constructed voluntary agreement proposal, and you will need the following to be in place:
- A viable business
- A realistic repayment schedule
- A willingness to work hard and make the necessary sacrifices
You don’t need all your creditors to accept the arrangement, you just need the majority.
Creditors will be more understanding of your situation if you have admitted your financial difficulties and you are trying to do something to resolve it.
It is important you consider taking steps to resolve your insolvency or cash flow problems, the sooner you start planning your finances and taking action the better it will be for your businesses, and the better chances of survival.
To help your business overcome its financial difficulties it is advisable to speak to a business turnaround specialist. They will be able to give you an objective view on your business situation and they will be able to suggest a range of methods to help turn your business around.
To understand the whole range of options and to get help choosing the right one for your business contact us on 0800 597 4757 or enquire online using the form opposite.
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