BMP Lumber Co. BMP Lumber Company has been in operation for ten years. During the past several years BMP has experienced significant growth, which its owner, Mr. Paul Grant, believes is likely to continue into the future. This belief has lead Mr. Grant to conclude that BMP requires a bank loan of $80,000 to sustain the business. As financial advisor to Mr. Grant, it is our position that: (a) a loan is required to cover the …
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…as collateral. In conclusion, we recommend that BMP Lumber secure a short-term loan of $66,000 to cover the company's short-term working capital needs. Our recommendation is that this loan take the form of a line of credit, secured by accounts receivable and inventory that the firm has on hand. This arrangement will provide Mr. Grant with the short-term cash flexibility that he requires. BMP Lumber will also need to review its inventory and accounts receivable policies.