Can I get a business loan with an IVA?

If you're running a business and have an Individual Voluntary Arrangement (IVA) in place, you may wonder whether you can still qualify for a business loan. The good news is that having an IVA doesn't necessarily rule you out from securing a loan for your business.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to repay your debts over a set period, usually five to six years. It’s a legally binding arrangement that helps you manage your debt while avoiding bankruptcy.

With an IVA, you make affordable monthly payments based on what you can afford, and at the end of the term, any remaining unsecured debt is usually written off. The agreement is managed by an insolvency practitioner (IP), who negotiates with your creditors and ensures payments are made correctly.

IVAs can affect your credit score and financial options, but they provide a structured way to regain control of your finances.

Can you get a business loan during an IVA?

Yes, but you typically need permission from your Insolvency Practitioner (IP) before taking out a business loan. Most IVAs have borrowing restrictions, requiring approval for new credit above a set limit. Your IP will assess whether the loan could impact your repayment plan, and some lenders may request written approval before offering funding. Always review your IVA terms and consult your IP before applying.

IVAs and Business Types

An IVA (Individual Voluntary Arrangement) can impact business loan eligibility differently depending on your company structure:

Sole Traders

As a sole trader, your business and personal finances are legally the same. Since an IVA affects your personal credit score, lenders see you as a higher risk, making it harder to get a business loan. Some specialist lenders may still offer funding, but with higher interest rates and stricter terms.

Limited Companies (Ltd)

If you’re a director of a limited company, your personal IVA does not directly affect the company’s credit profile. However, if you provide a personal guarantee (which many lenders require), your IVA could make approval difficult. Additionally, if your company has its own IVA, lenders may be hesitant to provide funding.

Types of loans available for businesses with an IVA

Securing a business loan while under an Individual Voluntary Arrangement (IVA) can be challenging, but it’s not impossible. Some lenders may still offer options, especially if your business is financially stable and can demonstrate its ability to repay.

Here are some types of business loans that may be available for businesses with an IVA:

• Secured Business Loan: A secured business loan requires the borrower to offer assets (such as property or equipment) as collateral to secure the loan.
• Invoice Finance: Invoice financing allows businesses to borrow money against outstanding invoices. Instead of waiting for customers to pay, you can get immediate cash flow.
• Merchant Cash Advance (MCA): An MCA is a loan based on future credit and debit card sales. A lender advances a lump sum, which is repaid by a percentage of your business's daily card transactions.
• Asset finance: Asset finance enables businesses to borrow money to purchase equipment or machinery, using the asset as collateral.

How to improve your chances of getting a business loan with an IVA

1. Consult with your Insolvency Practitioner (IP)

Before applying for a business loan, it's crucial to consult with your Insolvency Practitioner (IP). They manage your IVA and can advise on the best approach for seeking additional financing. Your IP may also need to approve the loan, ensuring you stay compliant with your IVA terms. They can guide you on managing finances while improving your chances of loan approval.

2. Show strong business performance

Keeping accurate and up-to-date financial records is crucial. Lenders want to see that your business is profitable and that you’re capable of managing your finances. Presenting strong financial statements, including cash flow forecasts and profit-and-loss reports, shows that your business can generate enough revenue to repay the loan, making it more likely for lenders to consider you, even with an IVA.

3. Offer collateral or security

Offering valuable assets such as property, equipment, or stock as collateral can help reduce the lender's perceived risk. Securing the loan with collateral reassures the lender that they have a backup option if the loan isn’t repaid. This can improve your chances of approval, as the focus shifts from your IVA to the assets available to back the loan.

4. Work with a broker

A finance broker can help you navigate the loan application process, especially if you have an IVA. Brokers specialise in working with businesses in difficult financial situations and can connect you with lenders who are more likely to consider your business for a loan. They can also help you prepare a strong application, improving your chances of securing funding.

Our final thoughts

While having an IVA may complicate the loan application process, it doesn’t necessarily prevent you from obtaining a business loan. Different factors, such as your business type and the presence of personal guarantees, can influence your options. By consulting your Insolvency Practitioner, improving your business finances, and exploring specialised loan options, you can increase your chances of approval. Staying informed about your IVA terms and working with the right lenders will help you navigate the loan process more effectively.