Hometown Hardware Ltd (Hometown) and its owners, Bill Ikeda and Martha Wong. They operate a building supply store in Timmins, Ontario. Bill has become concerned about rumours that a big-box store will soon be arriving in Timmins. Bill is worried about the impact on Hometown and has decided that the only way Hometown can remain competitive is to expand and offer a broader range of supplies. Bill is confident that his customers will remain loyal to Hometown if they can obtain the same range of products from Hometown as will be available from the new big-box store. At the same time, Bill is concerned about the recent slowdown in housing construction. In order to finance the planned expansion, Bill has determined that Hometown needs $250000. Bill and Martha hope to have Hometown borrow that amount from the bank.

In the light of this chapter what factor would you advice bill and Martha to consider in financing hometown expansion? Did they make the right decision in borrowing money from the bank? What provisions should Bill and Martha be concerned about when they review the loan commitment letter provider to them by the bank?