If you run your business as a sole trader you can certainly solve your debt problem with an IVA. Helping business owners was one of the reasons why this solution was first introduced. Rather speak to someone? Call 0800 077 6180.
Included in this article:
- Can you run a business if you have an IVA?
- Can you include your business debts?
- Will you still be able to use credit?
Can you run a sole trader business if you have an IVA?
An IVA is certainly an option if you are a sole trader. Once the Arrangement is in place you can continue running your business as normal. Your debts will be reduced to a manageable amount freeing up your time to focus on your work and getting more customers.
When setting up the Arrangement care will have to be taken to ensure the monthly payment you propose is affordable and sustainable. To achieve this your business income and expenses will need to be reviewed.
It will be quite normal for these figures to change from month to month depending on how busy you are. As such the personal income which you can take from your business and use to work out your monthly IVA payment is normally based on average amounts.
If your business has only been trading for a short time, you may have to put your IVA application on hold until you have some trading history. You need to show that your income is sustainable.
Can you include your business debts in an IVA?
An IVA can be an ideal solution for a sole trader because both business and personal debts can be included. If you have a business loan or credit card these can be dealt with in the same way as your personal debts.
In addition one of the major advantages of an IVA is you can include money owed to HMRC. Tax owed in the current tax year as well as arrears from previous years, VAT and PAYE arrears can all be managed using this solution.
If you have trade debts these can also be added. That said this needs careful consideration because the credit facilities you have been using with these suppliers will then be withdrawn. You will usually have to work with them on a cash basis in the future.
Struggling to pay trade creditors such as building suppliers? Speak to us asap to void their often aggressive debt collection tactics (0800 011 4712).
Will you still be able to use credit during an IVA?
Access to credit during an IVA is limited. The Arrangement is recorded on your credit file which will make your credit rating poor. As a result applications for all new forms of credit will usually be refused.
This can cause a problem for sole traders if you need credit to run your business. If you have this requirement it might be possible to leave a creditor out of the Arrangement. For example you might be able to maintain a credit card to help with cash flow. However your business would need to be able to regularly clear the balance.
There are some credit facilities you can continue to use. Mobile phones on contract are not an issue. You continue to pay for these as normal. The same goes for vehicles on finance. You just need a plan of action if the finance agreement comes to an end while the Arrangement is still in place.
Certain forms of credit can still be used during an IVA. However it is not readily available. You will need to plan the running of your business on a cash basis.