Wilson-Lumber-Company

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Wilson Lumber Company

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This case has been adapted by Marc Bertonèche, Visiting Professor at the Harvard Business School, from the original Wilson Lumber Company case (HBS-9-286-122). It was prepared as the basis for class discussion rather than to illustrate either effective or ineffective liandling of an administrative situation.

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After a rapid growth in its business during recent years, the Wilson Lumber Company in the spring of 2002 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 trom the SuburbanNational Bank:to $1,630,000 at the end of2001. The maximum loan that Suburban National would make to any one borrower was $1,650,000 and Wilson had been able to stay within this limit only by relying very heavily on trade credit. Mr. Roger Wilson, owner and president of the Wilson Lumber Company, was therefore actively looking elsewhere for a new bankingrelationshipwhere he would be able to negotiate a larger loan. Mr. Wilson had recentlybeen introduced by a personal mend to Mr. George Dodge, an officer of a much larger bank:,the Northrop National Bank. The two men had tentatively discussedthe possibility that the Northrop bank:might extend a line of credit to Wilson Lumber up to a maximum amount of $3,250,000. Mr. Wilson thought that a loan ofthis size would more than meet his foreseeable needs, but he was eager for the flexibilitythat a line of credit of this size would provide. Subsequent to this discussion Mr. Dodge had arranged for the credit department of the Northrop National Bank:to investigateMr. Wilson and his company. The Wilson Lumber Company had been founded in 1990 as a partnership by Mr. Wilson and his brother-in-law, Mr. Henry Stark. ln 1997 Mr. Wilson bought out Mf. Stark's interest for $750,000 and incorporated the business. The business was located in a growing suburb of a large city....