Finance for a company in a CVA: what lenders will consider

This guide is for directors of companies that are in a Company Voluntary Arrangement (CVA), or are considering one, and need to fund stock, equipment or working capital while it runs. A CVA often solves the historic debt and leaves a cash problem behind: suppliers want paying up front, credit insurers withdraw cover and the bank facility may have gone. Smart Funding Solutions is a broker arranging finance from around £10,000 to £500,000+, with larger facilities available in suitable cases, and knows which lenders on our panel look at companies in or recently out of a CVA. It is a narrow market, and this page is candid about where it ends. For adverse credit generally, see our bad credit business loans hub.

01How a CVA changes a company's funding position

A CVA is a formal agreement, proposed by the directors through an insolvency practitioner, under which the company repays part or all of its unsecured debts over a period, commonly several years, while it keeps trading. It needs approval from 75% by value of the creditors who vote. GOV.UK's director information hub on CVAs sets out the process and the supervisor's role.

Several things change for funding once a CVA is approved:

• The CVA is public. It is filed at Companies House and appears on company credit reports, so every lender and supplier will see it.
• Trade credit tightens. Credit insurers usually cut or remove limits on the company, and suppliers that relied on that cover move you to pro forma or cash on delivery. That alone can create a working capital gap larger than the monthly CVA contribution.
• Secured lenders are not bound. A bank or invoice finance provider holding a debenture keeps its security unless it agrees otherwise. Many CVAs work precisely because an existing secured funder stays in.
• HMRC has priority. Since December 2020, HMRC ranks as a secondary preferential creditor for VAT, PAYE and employee National Insurance, as explained in HMRC as a preferential creditor. A CVA cannot pay preferential debts less than in full without HMRC's agreement, which shapes how much cash the plan absorbs.
• The terms may restrict borrowing. Many proposals require the supervisor's consent before the company takes on new credit or grants new security. Read your proposal before approaching anyone.

02What lenders need to see

• Contributions paid on time: every CVA payment made as agreed, evidenced by bank statements and the supervisor's reports.
• Tax up to date since approval: returns filed and current VAT and PAYE paid on time. HMRC normally makes this a condition of supporting a CVA, and a lapse can cause the arrangement to fail.
• Trading since approval: management accounts showing the business is generating a surplus after the contribution, not just covering it.
• Headroom for new repayments: the lender will stress the monthly cash flow with both the CVA payment and its own repayment deducted.
• What caused the CVA: a lost contract, a failed site or a bad debt that has been dealt with reads very differently from a business that was never profitable.
• Existing security: any debenture already registered, and whether its holder will agree to a new lender taking security over specific assets.
• Supervisor consent: written confirmation where the CVA terms require it.

03Finance routes that can work during a CVA

Route	Why a lender may consider it	What to watch
Invoice finance	Relies on your business customers paying, not on the company's credit history	Existing facility holders may need to consent; provider may want to collect debts directly
Asset finance on new equipment	The lender owns the asset until the final payment	Deposit likely; needs supervisor consent if terms restrict credit
Asset refinancing	Releases cash from equipment the company owns outright	Only unencumbered assets; releasing assets may need creditor or supervisor agreement
Merchant cash advance	Repaid from card takings as they arrive	Higher cost; takes a share of every sale
Loan secured on company property	Lender relies on the property	Existing charges; valuation; the property is at risk
Shareholder or director funding	No lender needed	Personal risk; ranks behind creditors if the CVA fails

Our pages on invoice finance, asset refinancing and merchant cash advances explain each product in general terms. Unsecured term loans from mainstream lenders are rarely available while a CVA is live, and a director's personal guarantee is almost always expected on anything that is offered.

04Before the CVA: the moratorium and new credit

Some companies use the standalone moratorium introduced by the Corporate Insolvency and Governance Act 2020 to buy time while a CVA or other rescue is prepared. During a moratorium the company must tell any lender that it is in a moratorium before obtaining credit of £500 or more, and debts incurred in that period can take priority if the company later enters administration or liquidation. GOV.UK explains how to apply for a moratorium. Finance during this window is very limited, and directors should take advice from their insolvency practitioner before borrowing anything.

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05Documents you will need

06Risks and alternatives

The biggest risk is that new repayments starve the CVA. Missing contributions can lead the supervisor to issue a notice of default and, if unremedied, to the CVA failing, which usually ends in administration or liquidation. New finance should make the plan more achievable, for example by replacing pro forma supplier payments with funded invoices, not simply add a second monthly burden. See our guide to funding a business through a downturn for the wider options.

Alternatives worth testing first: asking the supervisor whether a variation to the CVA is realistic, negotiating trade terms with a few key suppliers backed by your payment record since approval, and equity or loans from shareholders. If the company is not yet in a CVA and the pressure is mainly tax, compare Time to Pay against a tax loan before any formal process. Personal debt problems are a different matter; our guide to business finance with a director in an IVA covers that situation.

07After the CVA ends

When the company has met its obligations, the supervisor files a notice of completion at Companies House. Lender choice widens from that point, and further as filed accounts show profitable trading after the CVA. Keep the completion notice with your accounts, since many lenders ask for it, and check your company credit report to confirm it shows as completed.

08How we help

1. Read the proposal: we check the credit and security restrictions and whether consent is needed.
2. Identify the security: debtors, equipment, card takings or property that a lender could rely on.
3. Talk to the right people: with your agreement, we liaise with the supervisor and any existing secured lender.
4. Approach a short list: lenders on our panel that consider companies in a CVA, so you avoid repeated declines on the credit file.
5. Lender decision: the lender applies its own policy; if nothing sensible is available, we say so.

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

When the company has met its obligations, the supervisor files a notice of completion at Companies House.