At its next meeting, the Committee must decide whether to approve the purchase of $1.2 million of convertible debentures in Budget Finance Corporation, a financial services company, headed by George Ephram, that buys commercial paper from retailers in low-income neighborhoods. I recommend that we approve this purchase: It both meets our financial criteria and advances us toward our advertised goal of participating in the revitalization of low-income areas.
Financial Criteria
o Budget Finance should be able to make payments on schedule. The
anticipated increase in business seems reasonable, given Budget's strong
management and projected market growth.
1. Budget's program should attract retailers and overcome the industry's
traditional problems--shoddy merchandise, inadequate follow-up on
defaults, and poor selection of potential customers.
2. In addition, the bilingual partner and employees should attract new
business in the Spanish-speaking community.
3. Budget's experienced management, innovative systems, and training
and computer programs, combined with a growing economy, should
easily provide Budget with the cash flow necessary to repay its debt
to the bank.
Minority Community
o This loan will be a visible symbol of the bank's commitment to helping
low-income areas.
1. Budget is involved in almost every neighborhood in which we have a
branch (see Exhibit 1).
2. Joint advertising, both print and TV, will reinforce this tie.
3. Acquisition of convertible debentures will demonstrate the bank's
interest in participating in the ownership of local business.
4. Budget's training programs and the loan will have a ripple effect:
Budget will channel the bank's funds to retailers, indirectly
