Negotiating a CVA With Creditors

When your company is grappling with numerous debts, and cash flow is insufficient, one of the limited options available, aside from seeking external financing, is to engage in negotiations with creditors. The aim is to request a reduction in monthly payment amounts or establish a payment plan that provides the flexibility needed for recovery. Unfortunately, this doesn’t always materialise, particularly when the individual making the proposal lacks experience in negotiation.

Here are five ways you can enhance your success rates when negotiating with creditors:


1. Be Business Like

When engaging with a creditor over the phone or composing an email to seek revised repayment terms, the key is to maintain a cordial tone in your responses and convey your recommendations or proposals succinctly. Be direct but respectful and professional. Avoid sounding frantic, desperate, or overly emotional during phone conversations; creditors are more interested in negotiations than hearing a sob story.


2. Formulate a Realistic and Mutually Beneficial Agreement

To secure approval for an agreement, a creditor initially seeks assurance that you can adhere to the proposed terms. This entails conducting thorough accounting and budgeting to ascertain precisely how much you can realistically afford to pay each month. Presenting a copy of your accounts to the creditor provides evidence that you consistently have sufficient surplus income to allocate towards repayments.


3. Be Prepared

Jot down your intended message and be ready to present your proposal confidently and without hesitation. This ensures clear communication of your message. Anticipate interruptions from the creditor and have responses prepared for potential objections before you conclude. While your pitch should be well-planned and delivered, it doesn’t need to be lengthy. Often, initiating negotiations with a simple question is the most effective approach. If you’re sending an email, keep it concise, avoid unnecessary details about personal circumstances and excuses, and ensure thorough proofreading.


4. If the Proposal is Denied Ask Them Why and Attempt a ‘Plan B’

If the creditor is hesitant to approve the proposed new payment terms, you can politely inquire, ‘If you don’t mind me asking, what is the main reason why that proposal is not acceptable to you, and do you have any alternative suggestions?’ This serves two purposes – it provides you with the information required to reevaluate and develop a new proposal, and it encourages the creditor to actively participate and present their own negotiation alternatives.

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5. Consider a Formal Negotiation Through a CVA

A company voluntary arrangement (CVA) is a formal agreement between your business and its creditors, formulated and proposed by a licensed insolvency practitioner (IP). With the IP handling the creation and presentation of the agreement to creditors on your behalf, the likelihood of approval is significantly increased. Creditors often place trust in the expertise of IPs as they are legally obliged to act in the best interest of your company and its creditors. Additionally, a CVA shields you from the prospect of being taken to court by any of the creditors participating in the agreement.

If you wish to explore formal negotiations through a CVA, feel free to give us a call or send us an online message to discuss your case. We’ll assess whether your company could genuinely benefit from a CVA and assist you in initiating the process.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.