Bob Davidson and Sheila Thornton worked for several years as sales representatives for Xerox Corporation. During this time, they became close friends as they acquired expertise with the company’s full range of copier equipment. Now they see an opportunity to put their experience to work and fulfill lifelong desires to establish their own business. Rolltide College, located in their city, is expanding, and there is no copy center within five miles of the campus. Business in the area is booming, and the population in this section of the city is growing. Davidson and Thornton want to open a copy center, similar to a FedEx Office, near the campus. A small shopping center across the street from the college has a vacancy that would fit their needs. Davidson and Thornton each have $20,000 to invest in the business, and they forecast the need for $30,000 to renovate the store. Xerox Corporation will lease two large copiers to them at a total monthly rental of $4,000. With enough cash to see them through the first six months of operation, they are confident they can make the business succeed. The two work very well together, and both have excellent credit ratings. Davidson and Thornton must borrow $40,000 to
amass a total startup capital of $80,000, which will allow them to start the business, advertise its opening, and keep it running for its first six months. Assume the role of Davidson and Thornton, the partners who will own Rolltide Copy Center.
Requirements
1. As a group, visit a copy center to familiarize yourselves with its operations. If possible, interview the manager or another employee. Then write a loan request that Davidson and Thornton will submit to a bank with the intent of borrowing $40,000 to be paid back over three years. The loan will be a personal loan to the partnership of Davidson and Thornton, not to Rolltide Copy Center. The request should specify all the details of Davidson and Thornton’s plan that will motivate the bank to grant the loan. Include a budgeted income statement for the first six months of the copy center’s operation.
2. As a group, interview a loan officer in a bank. Have the loan officer evaluate your loan request. Write a report, or make a presentation to your class—as directed by your instructor—to reveal the loan officer’s decision.