IVA’s for the self-employed

Whilst many people see the prospect of being self-employed quite a liberating experience, it can also have substantial downfalls – not least of all, the continued pressure of having to generate a set income each month come what may.  And let’s not forget there’s no paid annual leave, company pension scheme or other perks such as statutory sick or maternity pay. In fact, it can all be quite daunting and if the business doesn’t do well then the prospect of getting into increasing debt might well become a serious issue.

In this article we take a look at how IVA’s can work for the self-employed and whether or not they have any impact on general trading terms.

The history of IVA’s

Interestingly enough, IVA’s were first introduced by the Insolvency Act 1986 to help struggling businesses with their debts.  However, since then they’ve been used increasingly more by employed people – and not just those who are self-employed.

How can an IVA help my business get out of debt?

As well as incorporating any personal debts you might have, an IVA Scotland can also be used to address trade creditors and other debt types such as business credit cards, bank overdrafts and trade accounts.

Will an IVA have any impact on my business?

If you decide to go into an IVA then you need to be aware of all the implications from a trading point of view.  In essence, the key concerns are as follows:

  • You’ll have to declare to your suppliers that your company is struggling and that you’ve got yourself into debt.
  • Once you’ve been transparent about your financial situation then it’s likely that any trading accounts will be closed down and you won’t be able to have any further credit.  Whilst your insolvency practitioner might grant permission for you to maintain one trade account active, you must bear in mind that any suppliers might have concerns about your ability to repay and might therefore insist on cash payments or immediate bank transfers.
  • You might be required to open a basic bank account (with no overdraft facility).  These account types are often more expensive to administer and you might have to rebuild your credit history before your bank or lender will reinstate any previous privileges you might have enjoyed.

What are the advantages of going into an IVA from a business perspective?

If you decide to enter into an IVA then all your debts will be consolidated so that you only have to make one monthly repayment to your insolvency practitioner.  Ultimately, this should remove the cost of debt which can bring an end to any small business concern. There can be little doubt that running a business often has financial implications and an IVA can certainly help you get both yourself – and your business – firmly back on track.  After all, once the IVA period has ended you can concentrate on rebuilding your financial future much more positively and hopefully, without having compromised any business relationships along the way.