CREDIT ASSESSMENT: MR-L SUPPORT SERVICES LTD

Company No: 08974822 | Assessed: Based on filings to 30 April 2026

1. CREDIT OPINION: CONDITIONAL

Reasoning: MR-L Support Services Ltd demonstrates a core capability to service debt, but the most recent financial year shows a concerning deterioration in net assets and cash reserves. The company remains solvent with positive shareholder funds, but the trend is downward—net assets fell from £51,990 to £44,255 in FY2026, and cash dropped by over 41% from £36,833 to £21,623. The business has also increased its reliance on short-term bank debt. A conditional approval is appropriate—facilities should be sized conservatively and monitored against the key metrics outlined below.

2. FINANCIAL STRENGTH

Balance Sheet Position (FY2026 vs FY2025)

Key Observations

• Declining equity base: Net assets have fallen by £7,735 (14.9%) year-on-year. This follows a more significant drop from £90,366 in FY2024 to £51,990 in FY2025—a cumulative decline of over 50% from the FY2024 peak.
• Fixed asset depreciation: Tangible assets reduced from £47,420 to £36,102. No new capital expenditure is evident—the cost base remained static at £118,562, meaning the company is not reinvesting in plant and machinery.
• Debt restructuring: Long-term bank loans reduced from £39,165 to £25,635, but short-term bank debt increased from £6,470 to £10,000. This suggests a reclassification of debt from long-term to short-term as repayment schedules mature—a normal progression but one that increases near-term liquidity pressure.
• Working capital squeeze: Net current assets weakened by £9,947. Trade debtors increased significantly from £7,176 to £23,416 (over 3x), while cash declined. This indicates either strong sales growth on credit terms or potential collection issues.

Historic Context

The company's balance sheet has been volatile over the past decade: - Net assets peaked at £104,123 in FY2023 - Fell to £90,366 in FY2024 - Then dropped sharply to £51,990 in FY2025 - And further to £44,255 in FY2026

This trajectory warrants attention. The business is profitable on a cumulative basis but is clearly distributing profits or experiencing reduced profitability.

3. CASH FLOW ASSESSMENT

Liquidity Position

Assessment

• Adequate but weakening liquidity: The current ratio of 2.05x remains acceptable for a small services company, but the deterioration from 3.07x is significant.
• Debtor concentration: Trade debtors of £23,416 represent over 35% of current assets. With only 2 employees, the business likely has a small client base—concentration risk is a real concern. The jump from £7,176 to £23,416 in trade debtors needs investigation: is this revenue growth or slow-paying clients?
• Other debtors: A static £20,855 in "other debtors" across both years warrants scrutiny. This could represent a loan to the director or related party, which would be a credit negative.
• Tax liabilities: Taxation and social security creditors rose from £14,658 to £22,052. This is a significant increase and should be monitored—payment plans with HMRC can be a red flag.
• Debt service burden: Combined bank debt (short + long term) stands at £35,635 against net assets of £44,255. The gearing ratio (debt/equity) is approximately 80%, which is moderate but rising.

Working Capital Cycle

The business appears to operate with minimal stock (none listed), consistent with a consulting/services model. The working capital cycle is therefore driven by debtor collection and creditor payment terms. The rapid increase in trade debtors without a corresponding rise in cash suggests working capital is being absorbed by outstanding invoices.

4. MONITORING POINTS

The following should be reviewed at each facility review:

1. Trade debtor levels and ageing: The 3x increase in trade debtors requires verification. Request aged debtor reports and evidence of collection performance. If debtors continue to grow while cash declines, this signals collection problems.

2. Nature of "other debtors" (£20,855): This static balance requires clarification. If this is a director's loan, it represents a leakage of value from the business that should be recovered before any new facility is advanced.

3. Cash position trajectory: Cash has fallen from £70,525 (FY2023) → £31,105 (FY2024) → £36,833 (FY2025) → £21,623 (FY2026). If this trend continues, liquidity could become constrained within 12-18 months.

4. Tax payment behaviour: The rise in tax creditors to £22,052 should be monitored. Request confirmation that all filings are current and that no time-to-pay arrangements are in place with HMRC.

5. Profitability trend: The income statement is not filed (small companies regime), but the decline in retained earnings from £51,790 to £44,055 implies a loss or significant drawings in FY2026. Request management accounts to understand profitability.

6. Capital expenditure: No new fixed asset investment is occurring. For an engineering consultancy, outdated equipment could impact service quality and future earnings capacity.

7. Director's continued involvement: The company relies on a single director (M Xxxxxxxname shown to subscribers). Key person risk is elevated—consider whether key man insurance or succession planning exists.

EXECUTIVE SUMMARY

MR-L Support Services Ltd is a solvent, established engineering consultancy with a decade of trading history, but the FY2026 accounts reveal a concerning downward trajectory: net assets have declined over 50% from their FY2023 peak, cash reserves have fallen sharply, and trade debtors have tripled year-on-year. The company can service debt obligations at present, but the deteriorating liquidity position and rising short-term liabilities warrant a conditional approach—approve facilities at conservative levels with enhanced monitoring, and require clarity on the static "other debtors" balance and the increase in trade receivables before advancing funds. The primary risk is not insolvency but rather a continued erosion of the equity cushion and cash position that would weaken the company's resilience to any economic shock.

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