- 08 May
Avoid CVA (Creditors Voluntary Arrangement) With Factoring
If you haven't used your outstanding sales invoices to raise finance you could consider factoring and avoid having to go into a CVA (Creditors Voluntary Arrangement).
A CVA is an insolvency procedure whereby a company with debt problems enters into an arrangement with its creditors to pay all or some of its debts over a period of time. If you are considering such an arrangement and are considering using an insolvency practitioner you probably think that there is no chance of anyone wanting to give you any finance. That is not correct - factoring is quite unique in its approach to financing businesses.
A factoring company is not like a bank - they look at the validity of your sales invoices as their main security, rather than focusing on your financial accounts, credit history and what other assets you have. We often find invoice finance for businesses that have poor credit information. This could be a negative net worth, making losses or have previous poor credit history or poor financial accounts.
Factoring releases a percentage of the value of your outstanding sales ledger immediately and you can use this to pay your creditors. The balance of the value of your invoices is credited to you when your customers pay, less the factoring company's charges. Then as you raise new sales invoices they can become eligible for further prepayments which can greatly improve the cash flow of a business as you don't have to wait for customers to pay before you receive any cash.
So if you are considering a CVA or any other insolvency procedure such as Administration or Liquidation explore all the options and factoring could be one of them.