4 "Respect Writer"

Short Assignment 4 – Loan Defense

FINC 328 – Small Business Finance

University of Maryland University College

Loan Defense

Mobile Auto Repairs (MARS) was profitable in 2013 up business for over two years with no credit history past mine as the owner. In addition to the requested finances to support the business opening I as the owner am contributing the following monies in support of business success:

· $40,000 from savings

· $10,000 from 401k retirement contributions

In addition to this, I am also providing my primary residence which currently holds $50,000 in free equity above what is owed as well as a rental property which has $80,000 in equity. Both properties have a combined value of $350,000 which will adequately secure the requested funds to be borrowed. By securing the debt with real property and putting in $20,000 cash MARS can effectively expand its current business operations to serve a larger territory.

· Worst case scenario for revenue/profit/cash flow expectation would be $263,200/$67,000/+$24,600

· The worst case scenario is to only obtain 400 out of the 500 customers from the marketing and sales efforts. The lower than expected customer attainment considers the possibility of an economic recession, which would prevent customers from investing in maintenance. However, vehicles needing repairs are also considered where 100 customers less than the expected obtainment is appropriate. The average revenue per customer is $658 and average profit per customer is $331. Estimated expenses with taxes and loan payment included are $196,199 for the year. The profit earned is satisfactory for the owner’s cost of living and personal expenses including mortgages.

· Expected scenario of revenue/profit/cash flow projection: $329,000/$103,726/+$27,417

· The expected scenario is the obtainment of 500 customers from the marketing and sales efforts, all other things equal. The average revenue per customer is $658 and average profit per customer is $331. Estimated expenses with taxes and loan payment included are $225,174 for the year. If the profit earned can be sustained for a period of a year and a half, this will be enough to expand the business by adding another truck to the fleet along with a mechanic.

· Best case scenario of revenue/profit/cash flow: $394,800/$140,244/+$32,900

· This best case scenario is realized anytime more than 500 customers are obtained; however, 600 customers would be the ideal best case scenario. This would demonstrate the company’s ability grow beyond expectations and would be immediately able to add a truck to the fleet along with a mechanic. Investment would also be available to sustain the rapid growth due to the positive cash flow.