SURFACE LABS LIMITED

Executive Summary

Surface Labs Limited is a young micro-entity showing significant deterioration in net assets and a large increase in current liabilities, which raises liquidity and short-term financing concerns. Conditional credit approval is advised pending clarification on the nature of these liabilities and assurance of adequate cash flow to meet obligations. Close monitoring of working capital and director financing arrangements is essential to manage credit risk going forward.

SURFACE LABS LIMITED - Analysis Report

Company Number: 13249068

Analysis Date: 2025-07-20 17:47 UTC

1. Credit Opinion: CONDITIONAL APPROVAL
   Surface Labs Limited is a very young micro-entity, incorporated in 2021, operating in financial management consulting. Its latest accounts show a significant and unusual increase in current liabilities as of 31 March 2024, jumping from £46k in 2023 to over £2.5 million in 2024, nearly matching its current assets. This large liability spike, with only a small positive net current asset of £14.6k, suggests potential short-term liquidity stress or unusual financing arrangements. The balance sheet net assets have fallen sharply from £270k in 2023 to just £21k in 2024, indicating a weakening financial position. The company has no long-term liabilities, but the sharp increase in short-term creditors could affect its ability to service debt or meet payment terms without additional support. The presence of director advances and repayments, and no fixed repayment schedule, points to reliance on director financing, which may be a risk if internal cash inflows are insufficient. Given these factors, credit approval should be conditional on receiving further explanation of the large current liabilities and confirmation of ongoing cash flow sufficiency.

2. Financial Strength: Weakening Balance Sheet Health
   The company’s total net assets have reduced substantially from £270k to £21k over one year. Fixed assets are minimal and stable (~£6.4k), indicating limited tangible asset backing. The drastic increase in current liabilities (~£2.58 million) versus current assets (~£2.59 million) creates a very tight net current asset position of just £14.6k, down from £265k the previous year. This suggests the company may be operating with a large short-term financing burden or creditor balances, which weakens its liquidity cushion. Share capital is nominal (£10), indicating limited paid-in equity, and the shareholder funds mirror net assets, confirming no hidden reserves. Overall, the balance sheet shows signs of stress and dependence on short-term financing, reducing financial strength.

3. Cash Flow Assessment: Limited Visibility, Potential Liquidity Risk
   No direct cash flow statements are provided, but the accounts indicate a large increase in current liabilities with current assets roughly matching these liabilities. This implies working capital is nearly neutral, with little buffer to absorb timing mismatches in cash flows. Director loans and repayments are noted, showing some reliance on internal financing, but the lack of fixed repayment terms and no interest suggest informal arrangements. The company’s micro classification and small employee base (2 staff) may keep operating costs low, but without clear revenue or cash flow data, liquidity risk remains a concern. The company’s ability to generate positive operating cash flow to meet short-term obligations needs to be verified.

4. Monitoring Points:

• Monitor the evolution of current liabilities and the nature of these short-term obligations to assess if they are sustainable or indicative of cash flow stress.
• Review updated cash flow information or management accounts to confirm operational cash generation and liquidity.
• Watch director loan balances and repayment patterns for signs of increased reliance or potential funding gaps.
• Assess the company’s ability to file timely accounts and confirmation statements, which is currently satisfactory.
• Keep track of any changes in ownership or management, given recent director changes in early 2024.