CARPET EDGING UK LIMITED

Executive Summary

Carpet Edging UK Limited shows operational continuity with relevant industry expertise and timely filings, but financials reveal weakening liquidity and reliance on significant director loans. The company’s negative working capital and eroding equity position suggest cautious credit terms with close monitoring of cash flow and related party funding are prudent. Conditional approval is recommended pending improvement in financial metrics and evidence of stronger internal cash generation.

CARPET EDGING UK LIMITED - Analysis Report

Company Number: 13711685

Analysis Date: 2025-07-29 20:04 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Carpet Edging UK Limited is a relatively new private limited company (since 2021) operating in the specialised retail sector for carpets and floor coverings. The company is active with no overdue filings and has two directors with relevant industry and trade experience. However, the financials reveal a weakening liquidity position, with net current liabilities increasing to £6,468 at the end of 2024 from £4,738 in 2023, and a significant increase in directors’ loan accounts to £38,009 from £13,713. This reliance on director funding indicates potential cash flow stress. The company’s net assets have declined from £7,249 to £3,227, showing erosion in financial strength. While the business appears solvent, the negative working capital and dependence on director loans warrant monitoring and possibly tighter credit conditions or guarantees.

2. Financial Strength:
   The balance sheet shows tangible fixed assets of £9,695, down from £11,987, reflecting depreciation without new investment. Current assets are stable around £37,800 with stock introduced at £22,750 in 2024 (none reported in 2023), indicating inventory build-up which could tie up cash. Debtors increased to £8,223 from £2,379, partly due to amounts owed by related parties (£5,418), which may not be immediately collectible. Current liabilities have risen to £44,296, with a large portion being directors’ loan accounts (£38,009), and VAT/payables totaling £8,214. Shareholders’ funds fell to £3,127 from £7,149, reflecting accumulated losses or withdrawals, weakening the equity buffer. Overall, the company remains solvent but with limited financial strength and increased leverage on directors.

3. Cash Flow Assessment:
   The cash at bank dropped sharply from £34,653 in 2023 to £6,855 in 2024, a significant reduction indicating liquidity tightening. Negative net current assets signal that current liabilities exceed current assets, raising concerns about the ability to meet short-term obligations without continued director support. The increased stock level may impede cash conversion. The large increase in directors’ loan accounts suggests external or shareholder funding is currently necessary to sustain operations. Working capital management needs improvement to reduce reliance on related party funding and preserve liquidity.

4. Monitoring Points:

• Liquidity trends, especially cash balances and working capital ratios (current ratio, quick ratio).
• Levels and terms of directors’ loans to assess sustainability and risk of funding withdrawal.
• Debtor aging and collectability, particularly related party debts.
• Inventory turnover and stock management efficiency.
• Profitability metrics when available to evaluate if the business can generate internal cash flow.
• Any changes in management or operational strategy to address financial weaknesses.