1) Statement of financial Problem
IN general Butlar Lumbar appear to be a stable company that has seen sustained growth during the last few years..
2) General framework for financial analysis
One alarming fact about his business is the lack of a sales staff, yet the revenue has been able to grow at a fast pace; 18% in 1989, 34% in 1990, 19% in 1991. By adding another experienced salesman that is working for a base salary plus commission, they can grow the revenues even more. By having this person work on commission, this will eat into the profit margin for the materials he is selling. But the net impact to the BLC will be positive. I would advise Mr. Butler to select the LOC ...view middle of the document...
The cash flow is a problem that I would be worried about as well as the payoff of Mr. Butler’s previous partner.
* Its fair to assume that Mr. Butler is making more than is accounted for due to his incorporation. There are many tax deductions and write offs that allow him to live comfortably.
5) Conclusion and recommendations
My biggest recommendation is that Mr. Butler hire/ or preferably trade and barter with a client to get a financial consultant to take a look at his company’s finances. This would be beneficial either no matter what happens with the bank. Hopefully he could trade for these services and receive some advice that could help him run his business more efficiently.
After this recommendation I would look at two options:
The first would be to try to fix current issues with Suburban National bank. If the finances were ran efficiently and the bank relationship could stay in tack then I would recommend that Mr Butler try his best to stay away from larger loans and try to expoand with his own capital and assets. Thhis would allow him freedom from debt and maybe the fact that you need more money debt to run a company Is a sure sign that your company isn’t ready to move forward yet.
The second recommendation is to step back a re-evaluate what Mr. butler realy wants. Does he want alarge muti million dollar comapnay or does he enjoy the current size and can he run is operations free from any bank involvement. Another option would be to allow buy in from invbestrors or family and...