Business finance when a director is in an IVA

This guide is for directors of limited companies who have entered an Individual Voluntary Arrangement (IVA), and for sole traders running a business while in one, who need to know whether business finance is realistic and what it takes. The honest answer is that lender appetite is limited, some routes are closed until the IVA ends, and the right move is sometimes to wait. Smart Funding Solutions is a broker arranging finance from £10,000 to £20 million, and knows which lenders on our panel will consider a director with a live or completed IVA. For the wider picture on adverse credit, see our bad credit business loans hub.

01The short answer: company versus sole trader

An IVA is a personal arrangement between you and your own creditors. It does not bind a limited company, which is a separate legal person with its own credit file. That distinction decides almost everything.

	Limited company, director in an IVA	Sole trader in an IVA
Who borrows	The company	You personally
Does the IVA restrict the borrowing?	Not directly, but a personal guarantee you give usually counts as personal credit	Yes: IVA terms normally cap new credit without the supervisor's consent
What lenders see	A clean company file, and an IVA on the director's personal file	The IVA on the only credit file that matters
Realistic routes	Asset-backed or customer-backed finance; a guarantee from another director	Very limited until completion; small asset finance with supervisor consent

GOV.UK sets out how individual voluntary arrangements work, including the role of the insolvency practitioner who supervises the arrangement.

02Can you stay a director during an IVA?

Yes, in most cases. An IVA does not by itself disqualify you from acting as a company director. Bankruptcy is different: an undischarged bankrupt cannot act as a director without court permission, as the GOV.UK page on bankruptcy restrictions explains. Many directors choose an IVA partly for that reason. Check, though, whether your company's articles, a shareholders' agreement or your professional body's rules say anything about insolvency events.

03Why lenders look twice at an IVA

Most small business lending is decided as much on the directors as on the company. An IVA raises five questions for a lender:

• The guarantee is weak. Unsecured lenders rely on the director's personal guarantee as their fallback. Someone whose surplus income already goes to creditors cannot realistically meet a call on that guarantee.
• The guarantee may not be allowed. IVA proposals usually stop you taking on credit above a low limit without the supervisor's consent. A personal guarantee is a contingent liability that many supervisors treat as credit.
• The IVA is recent or live. A lender treats an arrangement in its first year very differently from one with years of contributions paid, or one already completed.
• The company must stand on its own. With the director's personal strength discounted, the company's accounts, bank statements and assets have to carry the application.
• The company may be supporting the IVA. If your contributions depend on salary or dividends from the company, the lender will ask whether new repayments leave enough to pay you, and your creditors.

Anyone can see a current IVA on the bankruptcy and insolvency register, and it appears on your personal credit file for six years from the date it was approved. Lenders will find it, so you must disclose it. Leaving it out of an application is misrepresentation and will end the application at best.

04Routes that can work

Finance secured on what the company owns or is owed

When the lender's security is an asset or a customer's debt rather than your personal promise, the IVA matters less. Asset finance on vehicles, machinery or equipment is the most common example: the lender owns the asset until the last payment. Invoice finance relies mainly on your business customers paying, and a merchant cash advance is repaid from card takings. Each can still ask for a guarantee, so the next point often decides the case.

A guarantee from someone else

Where the company has another director or significant shareholder with clean credit, lenders may accept that person as guarantor and treat the IVA as a disclosed, explained history rather than a bar. The co-director should read our guide to personal guarantees first: they would carry the whole liability.

Property owned by the company

If the company owns commercial premises with equity, a secured business loan against that property puts the lender's reliance on the asset. Lending secured on your home is a different matter: your home may already be dealt with under the IVA, and SFS does not arrange lending secured on a home you live in.

Waiting for completion

If none of those fit, the cheapest option can be to wait until the IVA completes. The number of lenders that will consider you rises noticeably once you hold a completion certificate, and again as the entry ages towards the six-year mark.

Most small business lending is decided as much on the directors as on the company.

05If you trade as a sole trader

Many IVAs for the self-employed are trading IVAs, where the business carries on and pays contributions from its profits. Because the borrower and the debtor are the same person, any new finance normally needs the supervisor's written consent, and the supervisor will ask whether it helps or harms the creditors. Small equipment finance that keeps you working, such as a replacement van, is the most likely request to be agreed. Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections. Our sole trader loans page covers options once the IVA has ended.

£212,300A transaction we arrangedApproved, then nearly lost at completion. £212K consolidated.A property-title requirement threatened a consolidation deal at the last hurdle. We worked it through and kept the structure intact.

06Existing business finance when you enter an IVA

Many directors ask a different question first: what happens to the borrowing the company already has? The answer depends on who owes the money and what you signed.

• Company loans and facilities. Debts owed by a limited company are the company's, not yours, so they are not part of your personal arrangement. The company must keep paying them as normal.
• Personal guarantees you have given. A guarantee is a personal liability, so the lender holding it may be treated as one of your creditors in the IVA, even while the company is paying on time. Your insolvency practitioner should list every guarantee when preparing the proposal.
• Events of default. Many loan agreements treat the insolvency of a guarantor, which can include an IVA, as an event of default. That does not always mean the lender will act, but it can let it ask for a replacement guarantor, extra security or, in some cases, repayment.
• Hire purchase and leasing in your own name. Agreements taken by the company stay with the company. Where you hold an agreement personally and the finance company owns the asset, it is treated differently from an unsecured debt, and your proposal will normally say whether it continues to be paid.

The practical step is to read each facility agreement and guarantee before the proposal goes to creditors, and to talk to the lender early rather than let it find the IVA on a credit search. Where a co-director with clean credit can step in as guarantor, a lender may be content to leave the facility in place. Our guide to personal guarantees explains how guarantees are worded and how they can be released or replaced.

07Documents lenders will ask for

08Risks to weigh before borrowing

Borrowing during an IVA can put the arrangement itself at risk. If the company takes on repayments that squeeze the salary or dividends funding your contributions, you may fall behind, and a failed IVA can lead to a bankruptcy petition. An increase in your income from the company may also have to be shared with your creditors under the IVA terms. Before any application, speak to your supervisor, and consider whether the need can be met by HMRC Time to Pay, supplier terms or a lower-cost reorganisation of existing debt instead. If the company rather than you is struggling, our guide to finance for a company in a CVA covers the corporate equivalent.

09How we approach these cases

1. Read the IVA terms first: we check what the proposal allows before any lender is approached, so nothing puts the arrangement at risk.
2. Find the security: assets, invoices, card takings, company property or a co-director's guarantee.
3. Approach a short list: only lenders on our panel with a known appetite for directors with insolvency history, to avoid a trail of declined searches.
4. Present the case plainly: the history, the current trading and the reason for the finance, with nothing left out.
5. Lender decision: each lender applies its own policy; some will say no, and we tell you honestly if waiting is the better option.

It is free to enquire; any broker fee is disclosed separately before you proceed.