CHOICE PROPERTIES (PETERHEAD) LIMITED

Executive Summary

Choice Properties (Peterhead) Limited is a small property investment company with modest equity and significant secured debt. Its financial position shows asset growth but tight liquidity and reliance on related party funding. Credit approval is recommended on a conditional basis with emphasis on close monitoring of cash flow, debt servicing, and asset valuations to mitigate risk.

CHOICE PROPERTIES (PETERHEAD) LIMITED - Analysis Report

Company Number: SC736448

Analysis Date: 2025-07-29 14:13 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Choice Properties (Peterhead) Limited is a relatively new private limited company engaged in property letting and trading. Its balance sheet shows modest net assets with a small equity base (£2,449 at 30 June 2024) and a significant amount of secured bank debt (£40,000) plus an interest-free related party loan of £51,466. The company has increased its tangible fixed assets substantially in the latest year, indicating investment in property assets. However, the low cash balance (£12,557) relative to current liabilities (£7,594) suggests tight liquidity. The director’s loan account is negative, indicating some director funding is being repaid or drawn. Given the company’s young age, limited operating history, and reliance on intercompany funding, credit should be extended cautiously, with conditions such as regular monitoring of cash flow and asset valuations.

2. Financial Strength:
   The company’s net assets have increased from £1,075 to £2,449 over two years, reflecting capital investment rather than operational profit growth. Fixed assets (property) form the bulk of the asset base (£88,952), with no depreciation charged, implying properties are held at cost and revaluation is not reflected. Current liabilities are modest (£7,594), but long-term liabilities total £91,466, consisting mainly of a secured bank loan and related party debts. Shareholders’ funds are minimal, highlighting a thin equity buffer and increased leverage. This structure indicates moderate financial risk, with significant debt secured on property, which may support lending if asset values are stable.

3. Cash Flow Assessment:
   Cash on hand increased from £2,742 to £12,557 year-on-year, which is positive but still low relative to total liabilities. Net current assets improved slightly to £4,963, showing a small positive working capital position. The company employs no staff and likely has limited operating expenses, relying mainly on rental income from two residential properties. The interest-free related party loan and director’s loan suggest informal funding sources supplement cash flow. Liquidity is tight, and the company’s ability to generate sufficient operating cash flow to service debt obligations is unproven, warranting close scrutiny of future cash flow forecasts.

4. Monitoring Points:

• Liquidity: Monitor cash flow closely to ensure timely servicing of bank loans and creditor obligations.
• Debt Levels: Watch for changes in related party loans and bank borrowings, especially any increase in unsecured or short-term debt.
• Asset Valuation: Confirm property valuations periodically to ensure collateral values remain adequate for secured lending.
• Profitability and Cash Generation: Review rental income sustainability and any operational costs to gauge future profitability and cash flow stability.
• Director Conduct and Related Party Transactions: Monitor for any changes in director loan balances or related party funding arrangements that could affect credit risk.