What are informal arrangements?
An informal arrangement is a flexible, non-legally binding agreement made directly with your creditors. Unlike formal insolvency processes like administration or liquidation, informal arrangements are handled privately, ensuring that your financial challenges remain confidential. This approach allows businesses to negotiate new repayment terms, reduce immediate financial pressures and focus on recovery without the stigma of formal insolvency.
Benefits of informal arrangements
Informal arrangements offer several advantages for businesses:
- Flexibility — Customised repayment plans tailored to your business’s financial situation.
- Confidentiality — No public record, protecting your company’s reputation.
- Cost-Effective — Lower fees compared to formal insolvency procedures, allowing you to direct more resources towards your recovery.
By keeping your business afloat and maintaining operations, informal arrangements provide breathing space to stabilise and rebuild.
When to consider an informal arrangement
Informal arrangements can be a practical option in a variety of circumstances, these might include:
- Temporary cash flow issues — If your business is experiencing short-term financial difficulties but remains fundamentally viable.
- Small-scale debt — When your overall debt is manageable but causing operational strain.
- Early signs of financial distress — Proactively addressing issues before they escalate into a crisis.
It’s crucial to ensure creditor cooperation for an informal arrangement to succeed. Open communication and a willingness to collaborate can make all the difference in reaching a mutually beneficial agreement.
How informal arrangements work
The process of setting up an informal arrangement typically involves the following steps:
- Financial assessment — A thorough review of your business’s financial position to determine what is affordable.
- Negotiation with creditors— Working with creditors to agree on new repayment terms, such as reduced monthly payments or extended repayment periods.
- Agreement on terms — Finalising a repayment plan that satisfies both parties, enabling your business to continue operating.
Professional advisors, like our team at Bennett Verby, play a critical role in this process. We have acted as mediators, ensuring clear communication and could help to secure the most favourable terms for your business.
Potential risks and considerations
While informal arrangements can be highly effective, they do come with potential risks:
- Creditor agreement is not guaranteed — Creditors are under no obligation to accept an informal arrangement.
- Relies on trust and communication — Success depends on transparent negotiations and realistic repayment proposals.
To increase your chances of success, it’s essential to present a credible plan that demonstrates your commitment to resolving the debt.
Get in touch
If your business is facing financial pressure, don’t wait for the situation to escalate. An informal arrangement could provide the breathing room you need to stabilise and move forward. Our team at BV Corporate Recovery & Insolvency Services Ltd is here to provide expert advice and guide you through the process. Contact us online today or give us a call at 0161 476 9000 for a free confidential consultation to discuss your options and find the best path forward for your business.
