eee ee eee een Se ed SEE THE JONSERED SUPER 670 AT YOUR DEALER m Business Beat _ Borrowed dollars in retail financing One way a retailer can finance his business is with ownership dollars — that is, with the dollars that the owner, part- ners or shareholders invest in it in return for a share of the business profits. The use of ownership dollars was discussed in last week’s column. The other way the retailer can finance the business is with borrowed dollars — that is, dollars. borrowed from a bank by Phil Hartt Towed TOP Manager, Terrace © from another lending institution, from Federal Business within the trade or from other sources. Development Bank Most businesses are financed by a mix _ of ownership and borrowed dollars, The former are expected to cover the initial working capital needs of the business, i.e. opening cash, inven- tory and even a portion of fixed asset purchases. The latter would come later, in support of perhaps accounts receivable, repaying them from collections. A retailer might also use borrowed dollars to assist financing fixed asset requirements. The reason why ownership dollars are required for this as well is because the lender will need some security and will attribute a liquidation value to these assets - which must cover, fairly closely, the amount of the loan. In certain circumstances — say, the borrower has established a “track record’? —-.a lender might help cover the cost of payroll and other operating expenses during the off-season, repaying -them from increased earnings in-season. Borrowed dollars for these purposes would qualify as short-term loans and would probably be by way of a revolving credit supported by a demand note and secured by the accounts receivable, inventory in some provinces, or outside security. Supposing the retailer wants to expand the premises or under- take other costly renovations, or wants to establish a branch operation or buy out a competitor: the amount of borrowed dollars needed for these purposes would be relatively large and a correspondingly longer time would be required to repay them. In- vestment of additional capital by the retailer may be requested if the capital value of the business is considered too low to provide reasonable security to the lender. Borrowed dollars for these purposes would qualify as a ‘medium-term loan if for periods up to five to seven years, a long- term loan if for periods exceeding seven years. When a retailer uses borrowed dollars, it involves-a firm con- tract to pay interest during the term of the loan; capital is repaid at the end of the term or during the term of the loan. Lenders ' may also impose other conditions such as the requirement for periodic financial reports or restrictions upon the uses to which the borrowed dollars may be put. The retailer should first be satisfied that the business can af- ford to meet the costs of debt service and the business’s other ongoing needs, before applying for a loan. That is even more im- portant than satisfying the lender. There is no point for a retailer to obtain a loan if it is expected to have just barely enough money to repay it. There must be ab- solute confidence that those borrowed dollars can be used in ways which will generate enough revenue to meet the scheduled payments and leave enough for other needs, e.g. financing in- creased sales and the necessary supporting inventory. Otherwise, the owner is simply risking the failure of the business. Sonsered Super 670 Takes on the Heavyweights! It's Cool... It's Fast... bi's Tough Will out cut anything i in its class This new.contender from JONSERED with its stronger mid-section can really _, toke a beating. The ; Super 670 pockso 4@ powerlul punch. of SWE P 3 tae Dare , Accept the chollange and be a cu cbove el onsered p. ProLine A CUT ABOVE THE REST RIVER INDUSTRIES (TERRACE) LTD. P.O, BOX 538 -- TERRACE, B.C. V8G 4B5 5130A HIGHWAY 16. WEST 635-7383 quality. of customer The Terrace and District’ Chamber of Commerce has just announced the official launch of the “Buy local/buy northwest” program, which will take place . during the month of October. The objective of the program is to promote an awareness of the benefits of buying locally through the theme of ‘'Compare us — Terrace”, with local mer- chants participating in a promo- tional campaign which stresses the range of products and ser- vices, competitive prices and the service ‘Terrace Review — Wednesday, September 21, 1988 13 available in here in town. With.the assistance of funding -from the City of Terrace, TV, radio and retail advertising will start this Friday. Participating merchants will also be providing “Terrace Dollars’? on the pur- chases made between September 26 and October 8, which can be redeemed against the next pur- chase made at that store until October 31. A draw will also be held on October 31 for a trip for two on Air B.C., all as an ex- pression of appreciation by local CASH BACK DIRECT FROM FORD" _ PLUS NO COST AIR CONDITIONING “ONSELECTED MODELS: “Buy local’”” campaign launched © ‘merchants for the support and patronage of the community. The Chamber of Commerce will also be hosting their first of | many monthly ‘‘Business after hours’’ socials to be held on Oc- tober 12, at the Chamber office, from 5 to 7 p.m, This is a new initiative which is designed to provide local business people with the opportunity to develop new business contacts, display their products or services and provide a relaxed atmosphere for the exchange of ideas. OO | cxkie | ehOOO | EEUS. |. Ford Escort L/GL | exeor | - Mercury Tracer L GS LS. | Ford Tempo 2demodels all models Mercury Topaz 2.dr models TLiGs/xXRS/LS Ford ‘Taurus ~ all models L/GL Mercury Sable all models GS Aerostar Wagon/Van | all models Ford Ranger regularcab | super cab XLT Ford Bronco II all models all models Ford F-Series Pickup | all models XL/XLT Lariat Cash rebate offer available with retail purchase of any qualified model. You must . prior to October 5, 1988. take delivery from dealership ° “PoTEM FORD] TERRACE > Quality isJob1, 463) Keith Ave., Terrace, 8.C, 1-800-772-1128 Call tall free: DL $548 635-4984