After the meeting, one of the bookkeepers stormed into Hill's office and demanded an explanation of Hill's decision. She convinced Hill that the employees had voted unanimously for the pay cut, and Borup was reinstated. "I was wrong," Hill says, "but I can't tell you how relieved I was. What's more, I felt that everybody was telling me that, good times or bad, we were all in this together."
At roughly the same time the Borup affair was getting sorted out, Hill's $350,000 note came due. Hill went to see Bob Link, then a lending officer at the Bank of Idaho and Hill's banking contact for several years. He renewed the note for 90 days at a staggering 22.75% interest, which at the time was 2 1/4 points above prime. "I simply didn't have any choice," Hill says. "I certainly didn't have the cash flow to pay off the loan."
Link, now director of consumer lending at United First Federal Savings and Loan in Boise, recalls that afternoon: "Sure it's tough for someone like Boyd to pay 22.75% interest. But look Boyd and I have been talking ever since he bought the company. We agreed from the start that it was important for him to build up his retained earnings against a rainy day -- and he has So now he's drawing on it. But a lot of other companies don't even have retained earnings and they can't last and I'm not so sure that's bad.Boyd's drawing on retained earnings now, but he can do it until times get better."
All this is only faintly reassuring to Hill, because recently many of those companies without retained earnings, the ones that "can't last," have been turning up on his own list of customers. Even in normal times, 30% of Hill's accounts receivable are "slow pay," that is, somewhere between 30 and 120 days overdue. But as interest rates rose to unprecedented heights, so did the number of his accounts in distress. Today, nearly half of Hill's accounts are slow pay on roughly $120,000 worth of business.
Hill has long recognized the importance of trade credit and frequently helps customers plan payment schedules. But full-blown commercial lending is another matter. Yet there is little he can do about it. Idaho usury laws prohibit charging more than 13% on amounts of $25,000 or less. And many of Hill's customers have begun to decide that it's foolish to borrow bank money at, say, 18% when they can, in effect, borrow the money from Hill at 13%. So Hill keeps adding names to a dog-eared list of slow payers -- 40 at last count.
Once a week, he tries to call everyone on the list. He asks for money, then he listens to the other guy recite every dodge known to man. Sometimes Hill forgets to call for several weeks in a row, until he's driving past a competitor's stockyard and spots an overdiue customer loading supplies. Then the pain comes back and he starts making the calls again. "Some of these people won't even pay me when they've got the money," Hill says. "They buy campers and snowmobiles instead." Hill figures that hound-dogging these accounts wastes 20% of his time every week, but it means there's still hope, and he vastly prefers it to bankruptcy court, where he seldom wins anything anyway.
Recently, Hill showed his 69-year-old father the bad debts he had written off. "I think it was around $30,000," Hill says. "My father couldn't believe it. He said, 'Boyd, if I had known you were that stupid I would have borrowed more money so you could have gone to school longer.' But I told him, 'Dad, you can never learn enough to stop this. It someone wants to get to you, he'll figure out a way." And despite personal guarantees before he extends credit, Hill still gets stung badly. What's more, it's often by customers he's known and worked with for years.
One man, for example, had conscientiously honored every debt during a nine-year relationship with Hill. But last January, he suddenly pulled the bankruptcy rip-cord after building up a $19,000 credit. "I suppose you can criticize me for letting him get to me for that much," Hill says, "but nine years without a problem is a long time." After too many unanswered phone calls, Hill finally tracked him down and confronted him one morning in a local restaurant. "I just wanted to hear him tell me to my face why he did that to me," Hill says, "but all he told me was that he didn't have any money and that he never wanted to see me again." And Hill never did see him again because the man leased a truck, declared himself in the trucking business, and left the state.
In one sense, he did Hill a favor -- out of sight, out of mind. Several other of Hill's bankrupt customers aren't as kind. They still live in Boise and Hill regularly sees them around town. One drives a new Cadillac and others live in expensive houses. Hill can hardly bring himself to talk about them. "People who file for bankruptcy and then keep their fancy cars and houses," Hill says, "prove to me that they didn't really try to save their companies. They weren't committed wholeheartedly to their business. I think that a business owner should be forced to liquidate everything he owns to make sure all debts get paid."
Hill admits that he's begun to wonder just how many people think like he does. But in the end, it doesn't make any difference, Hill says, because he doesn't intend to change his mind. "I'm a conservative man," Hill says. "I believe in things like integrity and responsibility. I guess if I had to choose one goal, it would be to build a company that's well thought of, and if it gets big along the way, that's fine."
Hill's story has no ending. Even now, Hill and seven other people at Western Wholesale are struggling to keep their company alive and then to make it grow again. Hill's been experimenting with higher-margin products and he's been studying business opportunities in solar energy. Most recently, he reports that he thinks his basic wholesale business has begun to turn around, although he's not sure. But he is sure of one thing. "I'll never declare bankruptcy," he says. "I'd sell my house and my car, everything, but everybody would get paid. If I couldn't start another business to pay off debts, well, I can always get a job, can't I?"
