Company Number: 13680258

Analysis Date: 2025-07-29 19:28 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   EDI Alterations Ltd shows signs of recent improvement in its financial position after several years of losses and negative net assets. The company has moved from net liabilities of £2.8k in 2023 to a modest positive net asset position of £341 in 2024, indicating a turnaround. However, the absolute values remain low, and the business is still at an early stage (incorporated in 2021) with limited scale and resources. Given the micro-entity size and industry (textile manufacturing), credit exposure should be conservative. Approval is recommended with conditions requiring close monitoring of ongoing profitability and liquidity.

2. Financial Strength:

• The balance sheet shows a very small fixed asset base (£1.3k) consistent with a micro business.
• Current assets (£15.7k) slightly exceed current liabilities (£14.1k), producing positive working capital of £1.56k for 2024 compared to a working capital deficit in prior years.
• The company has moved from negative net assets in 2023 (£-2.8k) to a small positive net asset position in 2024 (£341), reflecting retained earnings or capital injections reversing prior accumulated losses.
• Accruals and deferred income remain around £2.5k, which should be factored in when assessing true liquidity.
• Shareholders’ funds are minimal, indicating limited equity cushion.

3. Cash Flow Assessment:

• The positive net current assets suggest improved short-term liquidity, but the margin remains very thin, indicating vulnerability to cash flow shocks.
• No detailed cash flow statements are provided, but the increase in current assets and reduction in current liabilities point to better liquidity management.
• The small scale (2 employees) and micro-entity status imply limited operating cash flows; reliance on timely payments and possibly director funding may continue.
• Working capital is positive but modest, so overdraft or short-term financing may be required to manage fluctuations.

4. Monitoring Points:

• Profitability trends: Monitor next accounts for sustained profitability and cash generation beyond the small positive net asset turnaround.
• Liquidity ratios: Current ratio and quick ratio should be tracked regularly to ensure ongoing ability to meet short-term obligations.
• Trade payables aging: Assess if any delays in supplier payments are occurring that might signal cash stress.
• Director funding or related party transactions: Monitor for ongoing capital injections or loans that support liquidity.
• Industry conditions: Textile manufacturing can be cyclical; monitor external risks like raw material costs and demand fluctuations.