Clarkson Lumber Solution

2. Solutions

2.1 The bank loan

How much is needed to save the business? (Interest rate and maturity?) (quantify)

2.2 Change business operations

Even if Clarkson could get the amount of loan it needed from the Northrup National Bank, it had to change the way of operating to make this business sustainable.

1. As trade credit were very expensive as a means of financing, Clarkson should payoff current trade credits and notes, and take advantage of early discount; (quantify)

2. Clarkson should keep its operations lean and lower inventory level; (quantify)

3. Keep at a sustainable growth rate;

2.3 Renegotiate with Holtz to about the note

最后总的建议对于Clarkson 有关operation的一些做法

As the financial advisor, my recommendations to the Clarkson Lumber are:

1. The company must reduce liabilities and debt before accruing more and being consumed with payments and interest payments.

2. Clarkson should keep its operations lean and lower inventory level and set a reasonable stock level to reduce inventory.

3. The business cannot support the current rate of growth much longer. Mr. Clarkson has no choice but to infuse the business with outside cash right away, however he needs to seriously consider other forms of financing after that.

4. He should explore the possibilities of equity financing, in order to bring cash into the business. Such possibilities could include recommending to his brother in law to keep his money in the business and receive dividends. Another equity financing option would be to re-mortgage his home and invest his personal cash in the business.

5. Clarkson lumber would be to slow down growth and seek equity financing. Clarkson Lumber Company needs to have stricter policies on the customers they allow to purchase from them on credit.

6. The company needs to seriously think about increasing its internal funding through greater profits at the same time it reduces its growth rate to a more sustainable level.

对于bank

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