Company Number: 12595906

Analysis Date: 2025-07-20 18:37 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Arrow Fresh Limited demonstrates ongoing operational activity and asset growth since incorporation in 2020. However, the company shows persistent negative net current assets (working capital deficit) increasing from £-218,918 in 2020 to £-727,924 in 2024, indicating short-term liquidity stress. Current liabilities significantly exceed current assets, primarily due to high bank loans and trade creditors, which raises concern over the company's ability to meet short-term obligations without refinancing or improved cash flow. The company’s net assets and shareholders’ funds have improved to £387,478 in 2024, reflecting growth in fixed assets and retained earnings, but the working capital position warrants caution. Credit approval should be conditional on the company demonstrating improved liquidity management and maintaining sufficient cash flow to service debt.

2. Financial Strength
   The balance sheet shows strong growth in fixed assets from £122,683 in 2020 to £1,465,606 in 2024, signaling investment in plant, machinery, and equipment likely supporting operational capacity expansion. Shareholders’ funds have turned positive and grown steadily to £387,478, evidencing retained earnings accumulation. However, the company's negative net current assets position and rising current liabilities (from £378,263 to £1,528,449) highlight a reliance on short-term borrowings and trade credit. The gearing ratio is moderately high given bank loans exceeding £889,667 total (short and long term combined in 2024), which could pressure solvency if earnings weaken.

3. Cash Flow Assessment
   The company’s cash balance is critically low (£53 in 2024), with negligible cash reserves to cover immediate liabilities. Debtors have increased but trade debtors decreased, suggesting some concentration or collection risk. The significant working capital deficit indicates that current liabilities, including bank overdrafts (£577,963) and trade creditors (£801,349), are not fully covered by current assets, risking liquidity crunches. The company must improve its cash conversion cycle and possibly restructure short-term debt to avoid cash flow shortfalls.

4. Monitoring Points

• Working capital and liquidity ratios, specifically current ratio and quick ratio, to assess short-term payment capability.
• Bank facilities usage and covenant compliance due to high short-term borrowings.
• Debtor collection efficiency and aging profile to ensure receivables convert timely to cash.
• Profitability trends and ability to generate positive operating cash flow to improve liquidity.
• Any changes in fixed asset investments to ensure capital expenditure aligns with cash flow capacity.
• Directors’ ongoing financial management and any refinancing plans.