"Be Our Guest, Inc."
Be Our Guest Inc., a Boston based company, is a rapidly growing equipment rental company with substantial seasonality in its revenues and profits. In the spring of 1998, the senior management team is reviewing its financial plans in preparation for a meeting with the company's bank. The case provides an opportunity to forecast financial needs and consider the appropriate structure and amount of bank borrowing. � For years the company has been renting party supplies and furniture to caterers, event planners and hotels, it has also managed to grow gradually in a very volatile and seasonal business. The founder, Stephen Lizio and co-owners Al Lovata and Simone Williamson found it difficult to fund daily operations because of seasonal cash shortages.
Stephen Lizio met Anne Granger, Vice President at State Street Bank, at a networking event in 1995. She became interested in learning more about Be Our Guest, Inc.
Net Income
Debt
Asset & Liabilityand over the next few months she maintained contact, visiting the company and becoming acquainted with the management team. In 1996, the company had secured a $100,000 revolving line of credit at the prime rate plus 1.5%, and a $390,000 five-year loan at a fixed rate of 9.25%. The term loan's monthly payment was more than $8,000.
By the end of 1997, the term's loan outstanding balance was reduced to $315,000. On the contrary, the credit line had been increased to $140,000 and tapped out to fund a large jump in receivables in December. While a rise in receivables usually is a welcome event, many of Be Our Guest's customers had followed up their annual holiday rush, then party-equipment rentals peak, with their annual winter slump, leaving them unable to pay their bills until late spring, when business could be counted on to...