RED CHAIR HOMES LTD

Executive Summary

Red Chair Homes Ltd is a newly established real estate management company with a significant investment property financed by a long-term mortgage. The current financials show weak liquidity and negative equity, typical of a start-up phase, requiring careful cash flow management and director support. Conditional credit approval is recommended pending evidence of stable rental income and improved working capital management.

RED CHAIR HOMES LTD - Analysis Report

Company Number: 14849828

Analysis Date: 2025-07-29 19:22 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Red Chair Homes Ltd is a recently incorporated entity (May 2023) engaged in real estate management and investment. The company’s balance sheet shows a significant current liabilities position (£49,166) exceeding current assets (£2,300), resulting in a negative working capital of £46,866 and a net liability position (£3,265). The company has a long-term mortgage (£91,709) secured against investment property valued at £135,310. While the property asset provides some security, the negative equity and working capital deficit raise concerns about short-term liquidity and operational cash flow. Approval is conditional on obtaining further evidence of cash flow projections, rent roll stability, and support from directors to cover shortfalls, especially during the early trading phase.

2. Financial Strength:
   The company’s fixed asset base is concentrated in a single investment property (£135,310), acquired in September 2023, which is likely the main source of revenue. The presence of a mortgage with a 25-year term and 5.14% interest rate indicates long-term financing backing the asset. However, the company’s net assets are negative due to accumulated losses of £3,365 and significant liabilities. The balance sheet reflects a start-up phase with no accumulated profits yet and a small amount of share capital (£100). The negative shareholders’ funds imply a fragile financial position requiring close management.

3. Cash Flow Assessment:
   Current assets (£2,300) are minimal, with cash of only £1,500 and debtors of £800, versus current liabilities of £49,166 mainly comprising bank overdrafts and other creditors. This suggests a potential liquidity squeeze in the short term, with the company dependent on rental income or further capital injections to meet immediate obligations. The company’s ability to service both short-term liabilities and long-term mortgage interest depends on rental income generation and effective debtor management. The absence of a profit and loss statement limits visibility on operating cash flow but the negative working capital is a red flag.

4. Monitoring Points:

• Monthly monitoring of cash flows and rent collections to ensure liquidity coverage.
• Timely servicing of bank loans and mortgage interest to avoid default.
• Review of debtor aging and creditor payment terms.
• Directors’ financial support or equity injections as necessary.
• Performance of the investment property in generating rental income.
• Filing of subsequent accounts and confirmation statements on time.
• Watch for any deterioration in asset valuations or increases in liabilities.