As a sole trader, you are unfortunately more limited in your options for dealing with business debt than for example, a limited company. In terms of formal insolvency procedures, you only really have a choice between bankruptcy, a voluntary arrangement or an informal arrangement.
Our article ‘insolvency and sole traders‘ will give you a little more information on what constitutes a sole trader if you’re unsure; it also outlines the main procedures available to you. However, if you are a sole trader that wants to continue in business, and you have debts of over £15,000, you should be giving consideration to a sole trader voluntary arrangement.
A Voluntary Arrangement (IVA) for sole traders uses the same legislation as consumer IVAs (that is, an IVA based around personal debt such as credit cards, as opposed to personal and business debt combined). However, a well formulated sole trader IVA won’t follow the one-size-fits-all approach of a consumer IVA, but will be tailored to your business and personal circumstances.
Many aspects of how we deal with sole trader voluntary arrangements are a mirror of our approach to company voluntary arrangements (CVAs). With that in mind, our article, ‘What makes a successful CVA proposal?‘ provides a good reference point for how to prepare for a sole trader IVA. Essentially, our approach is to gain a more detailed understanding of your business and to propose a flexible approach to monthly contributions that provide a considerably higher chance of your IVA reaching a successful conclusion.
Although we find that most people seeking advice for voluntary arrangements for sole traders do so in relation to their businesses debt, their proposals must be based around all debt in their name. Therefore, any voluntary arrangement must also include any credit card, personal loan or other debt, such as council tax arrears. The proposal is normally based around a flexible monthly contribution payable for 5 years. If there is equity in the family home, or other assets, then a remortgage may also be required.
What information do we need from you? Initially, we’ll ask you to collate information relating to:
From that information, we’ll work with you to prepare proposals for your arrangement. These are forwarded to your creditors and a meeting of creditors is called.
The level of monthly contribution you pay into your IVA will be based upon:
We prefer to make your contributions fit around your businesses requirements, so if you run a seasonal business your monthly amount will vary throughout the year. For example, we would expect a garden centre to pay a lower monthly amount in the winter. In general, however:
If you have any questions, don’t hesitate to contact one of our business rescue experts directly.