FREELANCELEGALSERVICES LIMITED

Executive Summary

Freelancelegalservices Limited exhibits weak financial health characterized by persistent negative working capital, minimal net assets, and reliance on director loans for liquidity. The company's aggressive dividend payments and declining equity base raise significant concerns about its ability to service debt and sustain operations without external financial support. Given these factors, credit facilities are not recommended at this stage without substantial improvement or additional security.

FREELANCELEGALSERVICES LIMITED - Analysis Report

Company Number: 12743750

Analysis Date: 2025-07-20 19:07 UTC

1. Credit Opinion: DECLINE
   Freelancelegalservices Limited presents significant liquidity and solvency concerns. The company consistently reports net current liabilities over the past three years, indicating an inability to meet short-term obligations from current assets. Net assets have diminished drastically from £29,829 in 2020 to just £37 in 2024, reflecting erosion of equity and financial fragility. The company’s reliance on an interest-free loan from the director, increasing to £4,000, suggests cash flow support from insiders rather than operational strength. Dividend payments exceeding retained earnings further weaken the capital base. These factors collectively indicate a heightened credit risk and insufficient financial resilience to support new credit facilities without substantial conditions.

2. Financial Strength:
   The balance sheet shows a deteriorating financial position. Fixed assets are minimal (£1,574), with no significant long-term asset base to secure lending. Current liabilities (£19,047) exceed current assets (£17,510), resulting in negative working capital of £-1,537. Net assets stand at only £37, a steep decline from prior years, signaling near insolvency. The absence of share capital beyond £1 and dwindling retained earnings reflect limited capacity to absorb losses or fund growth internally. Overall, the company is financially weak with insufficient equity buffer.

3. Cash Flow Assessment:
   Cash balances are low (£12,229) relative to current liabilities and the company depends on director advances for liquidity. Debtors of £5,281 are modest but less than current liabilities, increasing risks if collections slow. The negative net current assets position indicates tight working capital management and potential cash flow strain. Dividend distributions (notably £55,100 interim dividend in 2024) appear aggressive given limited profits and liquidity, further stressing cash resources. The company's operating cash generation seems inadequate to support its obligations without external support.

4. Monitoring Points:

• Monitor trends in net current assets and liquidity closely; sustained negative working capital is a red flag.
• Track director loans and related party transactions for potential capital injections or withdrawals.
• Watch dividend policy to ensure distributions align with cash flow and do not erode capital further.
• Review debtor collection efficiency and creditor payment terms to manage cash flow risks.
• Observe any changes in business activity or profitability given the company’s small scale and reliance on consultancy services.