Sole Traders
Business Debt Help for Sole Traders & Professional Insolvency Advice
SOLE TRADER ADVICE
Typically - Sole Traders should consider all the options available and seek professional advice & business debt help immediately because (unlike Directors in most cases) their personal assets are at risk. This is due to the fact that they do not have the protection of the Limited Liability status. This may sound an obvious point but many Sole Traders ignore, or are oblivious to this fact. The clients who usually contact us are in dire straits with their Creditors and more often than not the HMRC is the main Creditor.
The most common mistake we have to counter is where the well meaning Sole Trader feels pressured to agree an unrealistic payment plan which is not delivered so my advice is simple -DO NOT AGREE ANY PAYMENT PROPOSAL WITHOUT PROFESSIONAL ADVICE. Why? Because it becomes more difficult to obtain the trust of Creditors once they have been let down by your agreed payment plan. This is especially the case with the HMRC who take a very dim view of any payment proposal default and will often resort to an immediate escalation of the legal weapons available to them. The 'weapons' may include a Statutory Demand followed by a Bailiffs visit, or Bankruptcy Petition.
So, if your up to your maximum overdraft limit, you're under pressure from Creditors and constantly juggling bills but your sales are good and the business looks viable on paper - what do you do?
An Individual Voluntary Arrangement may well be an excellent solution for you. When a client asks me why a Creditor would accept anything less than 100p in the £1 - I always ask them to imagine the situation from their Creditors point of view. If the Debtor has little or no assets currently and you forced them into Bankruptcy then you would get little or no return for your efforts, simple. However, If you (as the Creditor) were offered the choice of accepting 0.30p in the £1 after realising their options you would of course accept to get the best return possible. This is in very simple terms as you can imagine not all cases are this straight forward from a negotiations point of view.
So a trading IVA can be a good deal for Creditors and Sole Traders alike as long as the business is viable.
SO WHAT IS AN IVA?
Well any individual can have an Individual Voluntary Arrangement as long as you are overwhelmed by debt, you don't have to be in business. The Individual Voluntary Arrangement has been around for a while as it was introduced in the 1986 Insolvency Act and acts as a more positive alternative to Bankruptcy. A 'trading' Individual Voluntary Arrangement is an agreement for individuals in business, as a Sole Trader your personal debts and business debts are treat as one in the same when it comes to Insolvency. This means you can place all your personal debts together with your business debts, they all go into the Individual Voluntary Arrangement but technically there is no difference between an individual or Sole Trader Individual Voluntary Arrangement.
HOW DO I KNOW I'M INSOLVENT?
Ask yourself can I pay my bills when due? Or do my assets outweigh my liabilities and if the answer is no to both then you are likely to be Insolvent and it's time to seek business debt help.
WHY AN INDIVIDUAL VOLUNTARY ARRANGEMENT?
An 'IVA' is a legally binding agreement between you and your Creditors to pay off liabilities accrued, there we have the key main difference to you - it's legally binding.
From experience, despite what you may be told, trying to manage a significant amount of Creditors yourself will be overwhelming and time consuming, not to mention stressful. However, you will almost certainly be contacted by Debt Management Companies promising the Earth... Debt management is unlikely to reduce the amount of business debt, this option is just likely to extend the term of the business debt payments. This is why, as a Sole Trader you should always explore all of your options. We will always take you through ALL of your options and take your opinion and circumstances into account before going ahead with any solutions for your business.
Pride is always a big consideration and whilst a Bankruptcy will be advertised, an Individual Voluntary Arrangement will not be made available to the public.
HOW DOES IT WORK?
First and foremost your business needs to be viable and if it is - you meet with us at IMM and we will provide you with free advice and will outline what your options are. Once we have explained your options we will confirm that in writing to you in a free report which will also show any costs going forward, it's worth noting, however, that you do not pay for the Individual Voluntary Arrangement - the Creditors do. Once you engage us at IMM we act immediately taking away the Creditor hassle and once we are ready we can stop any legal action by way of an Interim Order on your behalf.
As well as 'trouble-shooting' your Creditors we work with you to pull together the Statement of Affairs (SOA) for your business. Effectively, the 'SOA' provides the bulk of your proposal and outlines what you will pay, how you can pay it, why the Creditors should consider it and why it is in their interests. There is more to it in the background that we arrange but in essence that is it, we are there to guide you through the 'SOA' and to provide you with the essential support that is likely to be required.
We will advise you in a Business Recovery capacity as to what is need to get your business back on track. Your Creditors (often HMRC) will need to be convinced that the same mistakes will not be made going forward so they feel confident to support your proposal. As part of this work we identify via a cash-flow forecast what is affordable to your business and this amount is what is proposed to your Creditors. Once the Creditors have your proposal and it is accepted the debt will often be reduced considerably and you are free to continue with your business.
It is at this point that the Individual Voluntary Arrangement is at its most vulnerable as we know from experience. Sole Traders who simply resort back to the 'old ways' find themselves in trouble just months later and are fast tracked to Bankruptcy. We, here at IMM often remain advisors for at least the first 3-6 months with our clients until new trends become 'the norm'.
WHAT WILL AN IVA COST ME?
There is no cost for the Insolvency advice and the costs for the IVA are paid for by the Creditors - the only charge we make is an hourly rate for the Statement of Affairs and business recovery advice. Our rates are extremely competitive and you are provided with any potential costs in writing before you need to make any decision placing you in control every step of the way. We make a commitment that we won't take on your case unless we believe it to have a every chance of success, we have no intentions of leading you on under false pretenses.
Get in Touch Now - Don't put it off any longer!
Protect your assets while you explore the alternatives to bankruptcy, and get some good professional insolvency advice in Sussex. Don't delay - call us now on 08453 479 822or 01903 891 586. The sooner you get in touch, the more options will be open to you.
It costs you nothing to find out your options as we offer a free first meeting and we promise that by the end of that meeting you will have your options available to you.
Alternatively, you can email either Mike or Tony at: mikes@imm.me.uk or tony@imm.me.ukand we will get back to you straight away to give you your options.
If you would prefer to speak with Mike (our senior consultant) directly please call him on his mobile - 079 1234 4394.
We always go the extra mile for each individual client and we do not treat you like 'just another number' so call us today and see how we can help you.