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Case I

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Submitted By ferolis
Words 1967
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BRIEF CASES
THOMAS R. PIPER
JEFFREY DEVOLDER
Jones Electrical Distribution
-HARVARD
~BUSINESS
\g7 PUBLISHING
4179
APRIL 6, 2010
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 onebranch bank-to $250,000 in 2006. The maximum loan that Metropolitan would make to anyone 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.
Background of Jones Electrical Distribution
Jones Electrical Distribution was founded in 1999 as a partnership between Nelson Jones and his college roommate, Dave Verden. In 2003, Jones and Verden had a disagreement on

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