AREA HOMES LIMITED

Executive Summary

Area Homes Limited is a start-up real estate company with tangible property assets but currently negative net assets due to reliance on director funding. The company’s liquidity is limited, and operational cash generation remains unproven. Credit approval is recommended on a conditional basis with close monitoring of cash flow, debt servicing, and business progress to mitigate risk.

AREA HOMES LIMITED - Analysis Report

Company Number: 14820602

Analysis Date: 2025-07-29 15:39 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Area Homes Limited is a newly incorporated private limited company with its first accounts filed as of 30 April 2024. The company operates in real estate investment and letting, holding tangible fixed assets valued at £194,230. However, it currently shows net liabilities of £61,718, primarily due to a substantial directors’ loan of £272,755 classified as a long-term creditor. The cash balance is low at £16,807, and current liabilities are high relative to current assets, resulting in minimal net current assets. Given the early stage of the company's trading history and its reliance on director funding, credit approval should be conditional upon ongoing monitoring of cash flow, repayments on directors’ loans, and evidence of operational income generation to support debt servicing.

2. Financial Strength:
   The balance sheet shows total assets less current liabilities of £211,037, mostly in fixed property assets with no depreciation applied, consistent with accounting policy for property held. The company has no retained earnings and negative shareholders’ funds of £61,718 reflecting initial losses or funding structure. The large directors’ loan indicates the company is currently reliant on insider funding rather than external creditors or equity. The absence of significant current assets apart from cash suggests limited liquidity buffers. Overall, the financial strength is weak at present, with a negative net asset position, but tangible fixed assets provide some collateral value.

3. Cash Flow Assessment:
   Cash at the year-end is modest (£16,807) and barely covers a fraction of current liabilities (£272,755). Net current assets are positive but equal to cash only, indicating very limited working capital to cover short-term obligations. The directors’ loan is a long-term liability and does not mature within one year, which somewhat alleviates immediate liquidity pressure. However, the company’s ability to generate cash from operations is unproven at this stage, and there is risk if the loan is called or operational cash inflows do not materialize. Close scrutiny of cash flow forecasts and monthly liquidity is essential.

4. Monitoring Points:

• Quarterly cash flow and working capital position to ensure liquidity adequacy.
• Progress in generating rental or sales income consistent with business plan.
• Repayment or restructuring of directors’ loans and any new external borrowings.
• Changes in net asset position and equity funding injections.
• Timely filing of future accounts and confirmation statements to monitor compliance and business continuity.
• Any changes in director appointments or ownership stakes that could affect control or strategy.