amount once a man was C. Owever, the Dann the art on Tour for Run Lain
the loan, citing concerns over the true market value of Kuhn's building.
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Although Kuhn did not believe that a new loan was essential for the survival of the business, he had hoped he
could secure new financing
to bolster Kopp's Cycle's financial position. In addition, Kuhn must address the
balloon payment
that is part of his current building loan sooner than later. There is no guarantee that his current
bank will renew this
loan, and he has not had much luck finding alternative financing.
1. What are the benefits to entrepreneurs who use debt capital (leverage) to finance their companies'
growth?
2. What are the risks associated with debt financing?
3. Why is using ratio analysis to keep track of their companies' financial performance over time so important
for entrepreneurs
?
4. What lessons concerning the use of debt financing can entrepreneurs learn from Charles Kuhn's
experience?
5. Assume the role of a small business banker. Suppose that Kuhn were to approach you for a bank loan to
refinance his debt. Which financial ratios would you be most interested in? Why? What advice would you
offer him?
6. Assume the role of a small business counselor. What advice would you offer him to ensure the long-term
survival of Kopp's Cycle?