Submitted by: Submitted by Isabel33
Views: 10
Words: 1883
Pages: 8
Category: Business and Industry
Date Submitted: 12/21/2015 05:33 AM
9-292-013
REV: JANUARY 4, 2002
Butler Lumber Company
After a rapid growth in its business during recent years, the Butler Lumber Company in the
spring of 1991 anticipated a further substantial increase in sales. Despite good profits, the company
had experienced a shortage of cash and had found it necessary to increase its borrowing from the
Suburban National Bank to $247,000 in the spring of 1991. The maximum loan that Suburban
National would make to any one borrower was $250,000, and Butler had been able to stay within this
limit only by relying very heavily on trade credit. In addition, Suburban was now asking that Butler
secure the loan with its real property. Mark Butler, sole owner and president of the Butler Lumber
Company, was therefore looking elsewhere for a new banking relationship where he would be able to
negotiate a larger and unsecured loan.
Butler had recently been introduced by a friend to George Dodge, an officer of a much larger
bank, the Northrop National Bank. The two men had tentatively discussed the possibility that the
Northrop Bank might extend a line of credit to Butler Lumber up to a maximum amount of $465,000.
Butler thought that a loan of this size would more than meet his foreseeable needs, but he was eager
for the flexibility that a line of credit of this size would provide. After this discussion, Dodge had
arranged for the credit department of the Northrop National Bank to investigate Mark Butler and his
company.
The Butler Lumber Company had been founded in 1981 as a partnership by Mark Butler and his
brother-in-law, Henry Stark. In 1988 Butler bought out Stark’s interest for $105,000 and incorporated
the business. Stark had taken a note for $105,000, to be paid off in 1989, to give Butler time to arrange
for the financing necessary to make the payment of $105,000 to him. The major portion of the funds
needed for this payment was raised by a loan of $70,000, negotiated in late 1988. This loan was
secured by land and buildings,...