www.iva.co.uk

Hi all, would welcome advice on the following.

I'm in full time employment and an IVA for the past 22 months. A friend and I have spotted a business opportunity, worked up a business case and concluded that it's very viable. However, my IVA states something along the lines of 'I am not intending to trade independently within the next 5 years'. Does this mean I can't be part of setting up / running the new company?

Martin

Being in an IVA, does not mean that you cannot be involved in running a buisness.

What I would ask is this ... Is your business going to be run in conjunction with your employment?

I very much doubt creditors would allow you to take a payment break in an IVA to allow you to set up a business. There is too much risk involved. However confident you may be yourself, you cannot guarantee a source of income from day one, from a business that is only just starting up that also be sufficient to allow you to maintain contributions in to your arrangement.

What funding will be required to get the business off the ground?

Where will it be sourced? - since you are unable to obtain any credit yourself, presumably it is all going to be funded from loans / grants / savings in your friend's name. It's going to be a big risk for him / her should this not take off and your friend could end up in the same position as you.

You can be a part of a new business - though it is unlikely you will be able to do anything to assist in financially setting up that business, for the simple fact that you will not be able to secure any form of credit without approval of your Supervisor and I doubt that, when consulted, your creditors would agree to such permission being given.

Tell it like it is.

Hi
Check that clause with your IP,I've not come across that before.
Any new business venture is risky,are you sure that it will generate enough income to pay your IVA from outset ?

Andy Davie
IVA.co.uk Spokesperson and Website Manager

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

Many thanks to both of you. The business start up costs are very low, less than 3k (we've run the plan passed 'busines links' and they agreed with this) I have also run the plan passed a friend who lectures on a reputable MBA programme and he's agreed that the model looks capable of generating a turnover of approx 250k (100k net profit) after 12 months - legally and very ethically I promise! My friend and I agreed to share start up costs and I know my Dad would provide a 'free loan' for my part of that, to the company, not to me. Our plan was to establish the company and employ a manager to run it for us on a day to day basis, allowing us to maintain our employment income, from my perspective therefore, not compromising my IVA payments.

I guess my worries were, 1, was I allowed to be involved at all given the clause and 2, if we do go ahead with it, the company of which I'd own 50% would be generating value month by month. We'd agreed not to draw on company funds for the first year, after which point I'd intend drawing value to increase my IVA payments, ultimately to forshorten the whole process. Would my creditors want to access the value of the company the minute it started generating value, or do you think they'd be prepared to wait until I began drawing remuneration from it?

Thanks again,

Martin

That clause does not prevent you from starting a business, and if you have a good business plan why not have a go. You will need to let your IP know about the business, and be prepared to hand over a proportion of profits generated during the remainder of the IVA period.

You will need to provide your IP with copies of the accounts on an annual basis, and they will then decide if they need to take payments from you.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

Many thanks Melanie,

I think we will... some t's to cross and i's to dot this week, but all being well we could be trading by mid January. To be honest, we're managing well on current I&E (worked hard to reduce our costs and improve income from the ouset of the IVA), so assuming we are in a position to extract value from the venture at from the end of year one, I'll be happy to plough my share back into the IVA.

Once again, many thanks for your time and expertise,

Martin

Hi Martin

Can I suggest that you try and keep your existing job going and see how the new business goes!

Two reasons for advising this:-

1. The IVA can be maintained and will provide you a little bit more to save.

2. Don't forget the economy is going to slow down dramitically and my clients are seeing a dramatic slow down in t5heir business activity and your new venture might take longer to get off the ground!

In any case good luck!

Good point Ray . I own a hairdressers and even though people will always need their hair doing , I've noticed a slow down in revenue due to all the interest hikes!!!!

Many thanks Ray and Becky, sound advice... certainly won't do anything to compromise the IVA and definitely keeping a close eye the general economy. To be honest, the nature of the proposal (and more importantly the customer) means that demand is unlikely to change during year one, however, provision costs, direct and indirect might, so margins might well be squeezed. The best thing is that as the set up costs are so low, the business would have to slip to < 15% capacity before it would in effect be trading at a loss..... Having said all of that, we're not trading yet and I remain anxious as to whether to procede or not... part of me just thinks I should get my head down and focus just on earning as much as I can in the day job to settle the IVA.... Decision will have to be made before Christmas for a number of reasons.... I'll let you know what happens...

Thanks again for both of your help and advice...

Martin

Well Martin keep us posted as to how you are getting on!