Case Analysis - The Hunt for Capital
Question # 00417929
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Updated on: 11/03/2016 07:22 AM Due on: 11/03/2016
Case Analysis: The Hunt for Capital
Micro-Link Inc. is a small company that manufactures computer mother boards and
equipment for computer makers. It is profitable on annual sales of about $12.2 million.
For the past few years, founders Ken Cranford and Ted Norton have invested heavily in
research and development of a “smart” home monitoring system that can help reduce
the owner’s carbon footprint. The SmartHome System continuously monitors utility
usage, giving home or business owners the ability to track, budget and streamline
energy use. It is priced comparably to a traditional home security system, but it offers
much more for fans of green living. Not only does the system allow people to monitor
and adjust their energy usage, it also will send immediate email or text alerts for security
violations, sump pump failure, irregular water flow, abnormal energy consumption, or
any other parameters the owners wish to set. According to Norton’s projections, this
new product alone could push Micro-Link’s sales to $100 million and profits to $16
million in just five years. The only barrier is money–or the lack of it.
Micro-Link’s bank was recently bought out by a much larger one, and now loan officers
have decided to eliminate the company’s line of credit. The bank has asked Micro-Link
to pay off the $1,000,000 outstanding balance on its line of credit. When the bank
suggested that Cranford sell two commercial properties he owned personally below
market value to pay off the debt, Cranford and Norton decided to find another bank.
Within a few months, Micro-Link had established a relationship with a new bank, which
extended a new, larger line of credit to the company. Unfortunately, Micro-Link needs
more to achieve the goals that Cranford and Norton have set for the company. MicroLink needs about $6 million for its sales and marketing efforts. Without the money,
Micro-Link will most likely continue to be a successful business, but it will be confined to
being a niche player in the industry. If Cranford and Norton can get the financing they
need, they believe they can establish Micro-Link as a major company in the green home
industry with a very bright future.
Micro-Link Inc. is a small company that manufactures computer mother boards and
equipment for computer makers. It is profitable on annual sales of about $12.2 million.
For the past few years, founders Ken Cranford and Ted Norton have invested heavily in
research and development of a “smart” home monitoring system that can help reduce
the owner’s carbon footprint. The SmartHome System continuously monitors utility
usage, giving home or business owners the ability to track, budget and streamline
energy use. It is priced comparably to a traditional home security system, but it offers
much more for fans of green living. Not only does the system allow people to monitor
and adjust their energy usage, it also will send immediate email or text alerts for security
violations, sump pump failure, irregular water flow, abnormal energy consumption, or
any other parameters the owners wish to set. According to Norton’s projections, this
new product alone could push Micro-Link’s sales to $100 million and profits to $16
million in just five years. The only barrier is money–or the lack of it.
Micro-Link’s bank was recently bought out by a much larger one, and now loan officers
have decided to eliminate the company’s line of credit. The bank has asked Micro-Link
to pay off the $1,000,000 outstanding balance on its line of credit. When the bank
suggested that Cranford sell two commercial properties he owned personally below
market value to pay off the debt, Cranford and Norton decided to find another bank.
Within a few months, Micro-Link had established a relationship with a new bank, which
extended a new, larger line of credit to the company. Unfortunately, Micro-Link needs
more to achieve the goals that Cranford and Norton have set for the company. MicroLink needs about $6 million for its sales and marketing efforts. Without the money,
Micro-Link will most likely continue to be a successful business, but it will be confined to
being a niche player in the industry. If Cranford and Norton can get the financing they
need, they believe they can establish Micro-Link as a major company in the green home
industry with a very bright future.
Read the "Hunt for Capital" case (one page) and answer the following four (4) questions:
1. Identify the possible sources Micro-Link could approach for the financing it needs.
2. Which source(s) would you recommend the company pursue most aggressively? Explain.
3.Which sources would you recommend Micro-Link avoid? Explain.
4. What should Duke and Morton do to prepare for their search for capital?
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Rating:
/5
Solution: Case Analysis - The Hunt for Capital