Debt Management Plan

Creditor pressure? Is a CVA or an informal debt management plan better for your business?

Many companies have times when they simply do not have enough free cash flow, for some this may be a short term minor issue whilst for others it could be a case that there is insufficient funds to pay creditors and the company is receiving threats of winding up petitions.  If the cash flow difficulties are reaching a stage where creditors cannot be paid, then it may well be time to consider either a company voluntary arrangement (CVA) or an informal debt management plan.  The question to consider is which is best? 

The answer… it will depend upon the company’s situation, and therefore the following questions should be considered first.

What is a CVA?

A company voluntary arrangement is a formal legally binding arrangement between the company and all of its creditors to compromise the debts.  The most common CVAs are an agreement with creditors to approve a reduction in the amount of the debt which would be paid over time, usually three to five years.

What is a debt management plan?

A debt management plan is a totally confidential form of debt management.  It is an agreement between the company and only certain pressing creditors that you identify, to repay those creditors in full over an agreed period. Qualified practitioners can act as advisors and intermediaries to draw up legally binding informal agreements with your creditors on your behalf. Such agreements can help to satisfy long-standing and more critical creditors, whilst also relieving your cash flow.

Cashsolv offer a unique debt management plan for 10-12 months, called a Creditor CashPlan™.

So what should be considered when deciding between a CVA or an informal debt management plan?


The first key factor is how long the company needs to repay creditors and whether it is a case of managing just a handful of creditors or more significant numbers.  If having reviewed the cashflow of the company, a longer period is required with possibly some debt being written off, it is likely a CVA will be best for you. With a CVA the debts can be rescheduled over up to five years.

Unlike a CVA a debt management plan is designed to only deal with specific pressing creditors, who rather than being paid random amounts depending on how loud they shout and draining your day to day cashflow, can be put into a structured plan over 10-12 months, taking the pressure off you.

Amount that can be repaid

The intention of the debt management plan is that creditors are repaid in full, over a year.  If instead the company needs to write off some of the debt as it is simply not affordable to pay in full, then a CVA is more appropriate.  The CVA proposal will set out what the company is likely to pay to creditors, if it were wound up and therefore show why a CVA is more appealing for the creditors.  The CVA should give a better return over time, for the creditors, compared to liquidation.

Who the creditors are

A CVA will include unsecured creditors of the company.  A debt management plan will usually only include specific trade creditors.  HM Revenue and Customs would not be suitable to be a creditor in the debt management plan, but any debt to them could be dealt with through a separate Time To Pay Arrangement outside of the plan. 

Key suppliers

To avoid problems with ongoing trading relationships certain suppliers can be excluded from a debt management plan, the benefit of a debt management plan is that you choose who you wish to include.


Both a CVA and a debt management plan are an agreement with the creditors and are not advertised.  However, there is a requirement to file CVA papers at Companies House, as such it is on the public record. Suppliers may not offer credit terms at first due to the CVA, although clearly without a CVA, if there are CCJs or other court actions on file due to non-payment, this would have the same if not worse effect.

There are no filing requirements for a debt management plan and therefore it will not become public record.  Those suppliers that are in the plan may move to cash on delivery, but new suppliers will not be made aware of the agreement that is in place.


Due to the informal nature of a debt management plan the associated costs are low and are also spread over the term of the plan and are usually set at 10% of the total amount owing, which is considerably less than the interest and penalties that could be charged if the creditors issued legal proceedings or you ended up with an unauthorised bank overdraft. A CVA is more complex and the fees for setting up a five year CVA would normally start at around £3,000, but could be more in the case of a very large company.

So ultimately, which is better?

It really does depend on all of the above, if a less formal, short arrangement is needed then a debt management plan is the likely way forward, otherwise a CVA is best if a longer term repayment plan is required.  In either case, what is key is to get proper expert and trusted advice at the outset to consider both options relative to your individual business circumstances.

For further information on Company Voluntary Arrangements or Informal Debt Management Plans, view our relevant pages:


Perhaps a Company Voluntary Arrangement or Debt Management Plan aren't for you right now. Take a look at our full range of unique products for solving cashflow problems.

Nicola Layland By Google+ |
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