$8.$ According to the CASE study below: When will Jones be able to repay the line of credit?

Jones Electrical Distribution After several years of rapid growth, in the spring of $2007$ Jones Electrical Distribution anticipated a further substantial increase in sales. Despite good profits, the company had experienced a shortage of cash and had found it necessary to increase its borrowing from Metropolitan Bank$$a local one$-$ branch bank$$to $$250,000$ in $2006.$ The maximum loan that Metropolitan would make to any one borrower was $$250,000,$ and Jones had been able to stay within the limit only by relying very heavily on trade credit from the manufacturers from whom Jones purchased the electrical products it sold to its customers. Nelson Jones, sole owner and president of the company, was therefore looking elsewhere for a new banking relationship that would allow him to negotiate a larger loan.

Jim Lyons, a homebuilder who was a friend of Jones, introduced Jones to Rachel Montrose, Lyons$$s relationship officer at the local branch of Southern Bank & Trust$$a large, regional bank. Southern had a $7-$year relationship with Lyons, including a current loan balance of over $$3$ million. Jones and Montrose tentatively discussed the possibility that Southern might extend a line of credit to Jones up to a maximum amount of $$350,000.$ Jones thought that a loan of this size would more than meet his needs for at least the next year, and he was eager for the flexibility that a line of credit of this size would provide. After discussion, Montrose had arranged for the credit department of Southern Bank & Trust to investigate Nelson Jones and his company.

The business sold electrical components and tools to general contractors and electricians. The products, which included items such as controllers, breakers, signal devices and fuses, were purchased from nearly $100$ different suppliers. Jones$$s customers used the products in the construction and repair of commercial and residential buildings. To a degree, Jones$$s sales followed the seasonality of its customers$$ businesses which had their highest activity during the spring and summer when weather was most conducive for construction work. The market in which Jones competed was large, fragmented, and highly competitive. Jones faced significant competition from national distributors, home centers, and other small supply houses. In spite of the competition, Jones had built up sales volume by successfully competing on price and employing an aggressive direct sales force who often visited customers at their job sites. In order to compete on price, Jones maintained tight control over operating expenses, including paying his salesforce primarily on commission and keeping overhead to a minimum. In addition, as part of his expense management effort, Jones had historically paid his suppliers within $10$ days of the invoice date in order to take full advantage of the $2\%$ discounts they offered for quick payments. Jones had also proved adept at demand forecasting and inventory management, allowing him to satisfy his customers$$ demand with a modest amount of inventory relative to his larger competitors. Jones$$s focus and dedication to his business allowed him to build it into a profitable operation. Jones Electrical Distribution had grown to $$2\mathrm{.}24$ million in sales and $$30,000$ of net income in $2006.$ Financing the Business Through Southern Bank & Trust

To solve his financing need, Jones wanted to develop a relationship with a larger bank that would not run into issues with maximum loans to a single borrower as he had experienced with Metropolitan Bank. He wanted to build a relationship with a bank that could grow with him, including to more locations if he decided to add additional sites in the future.

As part of its customary due diligence of Jones Electrical Distribution, the Southern Bank & Trust$$s credit department asked Jones$$s friend Jim Lyons for a reference on Jones. Lyons$$s reference included the following comments: $$Nelson is a businessman of the highest integrity and sharp acumen who is a very hands$-$on manager of his operation. He has excellent knowledge of the products he sells and provides customers with excellent service. He also lives a modest lifestyle.$$

The bank also toured Jones Electrical Distribution$$s warehouse and office and interviewed the area sales managers for three of the manufacturers from whom Jones bought the products he sold. The managers were unanimous in their favorable opinion of Jones. One of them said: $$Nelson has been one of our best performing wholesalers. He really knows how to build relationships and close a sale. He has also been great with his expense management. The guy does not spend a dime unless he absolutely has to$.$ We look forward to building a bigger relationship with him in the future.$$

In addition to the electrical distribution business, which was Jones$$s only source of income, Jones held jointly with his wife an equity in their home. The ho