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Group 1

Antique Store Case Study

Our client wishes to start an antique furniture business in Dardanelle from $10,000 worth of inventory already in her possession. Her goal is to open a storefront business using $16,000 of financial assistance to purchase a box truck for deliveries, $500 for an advertising sign, and $2,000 for a point-of-sale system. Loan collateral includes the truck and her store inventory. She plans to rent a Dardanelle storefront and pay overhead costs using income from sales. Fortunately for her, the antique furniture business can be a very lucrative market. Antique dealers and restorers agree that for a piece to be considered antique, it must be over 100 years old. Our client might choose to sell antique couches, tables, chairs, bed frames, bookshelves, and more. Antique items can be pricey which is part of the reason that the antique furniture market typically attracts the upper-middle class demographic. One item our client might sell would be an antique sewing box. The price range for this piece would be between $45 and $75 depending on factors like the condition, age and manufacturer. Another piece that our client might sell, would be an antique flip-top table in the $400 to $600 price range. Our client might also sell a large antique wooden china hutch. Pieces of this nature average in the $2,000 to $2,500 price range. These are just a few examples of the type of pieces that our client might sell. Our client could benefit from the healthy business competition in the Dardanelle/Russellville area since there are several other ‘antique’ stores. There are 19 antique stores listed within a 50-mile area of Dardanelle that sell antique furniture. Only 4 of these stores are listed as selling only furniture whereas the other 15 storefronts operate more as booth-style flea markets where a person can rent a booth and sell their items. Of the 19 stores listed, only 12 returned messages, including the 4 specializing in antique furniture. Only one of these stores delivers, but only up to 25 miles away from the store’s physical location. Since we’ve identified weaknesses of the other stores in the area the owner of this new store could possibly get customers from the other stores by providing good customer service (returning messages) and/or by offering delivery.

Union Bank and Trust, located in Warren, Arkansas, has approved the entrepreneur for a loan of $23,000. While the owner asked for a loan of $16,000, Randy Rawls, loan officer at Union Bank, says that he tries to match the principal amount of the loan with the dollar value of the collateral. The loan is set for 60 months at 6% interest. That equates to a monthly payment of $450, with the total loan amount including interest $27,326. A down payment of 20% ($4,600) is required. There is no minimum credit score, but the interest rate is subject to change based on credit history of the client. Union Bank requires the client to provide proof of insurance and pay stubs as proof of the client’s ability to repay in addition to the usual business loan requirements. Advantages of this loan source are a higher approval amount, lower monthly payment, and lower interest rate. Disadvantages to this loan are a longer payoff timeframe, higher down payment amount, and higher overall payment on interest. To further discuss this financing option, contact Randy Rawls, chief loan officer at Union Bank and Trust between the hours of 8:00 am- 4:30 pm Monday-Friday. Physical address for the Warren Branch is 201 North Martin Street, Warren, Arkansas 71671. Phone number is (870) 226-2035 and their website is www.unionbnk.com.

River Town Bank in Dardanelle, Arkansas, was able to approve the client’s requested loan amount of $16,000. The loan is a 36-month loan with an interest rate of 6.75%. Stacie Hottinger quoted a monthly payment of $474.44 for a total loan amount including interested of $17,080. River Town also requires a 20% down payment, but will count the collateral of the inventory as the down payment. The minimum credit score required for a loan from River Town Bank is 650. The client will also be required to provide a business plan for the antique store and her tax returns for the past two years, in addition to the usual business loan requirements. Advantages of this loan source include a shorter payoff timeframe, counting inventory collateral as the down payment, and the bank’s proximity to the desired storefront space. Disadvantages of this loan are a higher interest rate and higher monthly payment. To further discuss this financing option, Stacie Hottinger, consumer loan officer for the Dardanelle Main Branch can be contacted between the hours of 8:30 am-4:00 pm during weekdays. The bank branch’s physical address is 102 North Front Street, Dardanelle, Arkansas, 72834. The phone number is (479) 229-3311 and their website is www.rivertownbank.com.

A third financing option is a microloan through the Small Business Association. The association is a government program designed to help budding entrepreneurs with startup costs of a small business. For a $16,000 loan, the interest rate would be 8%. The timeframe for repayment is 72 months. Total loan value with interest is $17,280 with monthly payments of $240. Down payments and collateral vary based on credit score, for which there is no minimum requirement. The average down payment is 20% of the total loan value equaling $3,456. Other requirements for this loan are that the client must participate in a small business class to help them better prepare and succeed with their business. The intermediary office for the Dardanelle area is located in Huntsville, Arkansas. Carson Roddy in charge of microlending can be contacted for further information at Forge-Financing Ozarks Rural Growth and Economy located at 202 East Main Street, Huntsville, Arkansas 72740. The phone number is (501) 738-1585 and the contact website is www.sba.gov. Advantages for this loan option are low monthly payments and no minimum credit score. Disadvantages for this loan option are the timeframe for repayment, total amount paid in interest because of the time frame, and high interest rate.

To aid in the decision making process, loan information for each of the three financing options is broken down into the following chart for easy side-by-side viewing.

	Union Bank and Trust	River Town Bank	Small Business Association
Loan Amount	$23,000	$16,000	$16,000
Loan Length	60 months	36 months	72 months
Monthly Payment	$450	$474.44	$240
Total Loan Amount with interest	$27,326	$17,080	$17,280
Down Payment	20%	20%	20%
Minimum Credit Score	None	650	None

While all three loans are feasible for the entrepreneur, there are advantages and disadvantages to each one. While the loan for Union Bank and Trust has a lower interest rate than the other two options, the loan also has a longer time frame than the loan from Rivertown Bank. While the loan from Rivertown Bank, has the lowest time frame, it has the highest monthly payment. The loan from the Small Business Association has the lowest total loan amount including interest, it also has the longest time frame. Group One hopes this provides you with the appropriate information to excel in your future endeavors.