America's Largest Christian Bookstore Chain Files for Bankruptcy

To file bankruptcy, you’ve got to have debts. It strikes me that maybe Christian businesses need to think about how much debt they are contracting and how much work they’re doing to manage cash flow. Perhaps there is a theological issue when we consider the implications of net 30, net 45, net 60, fifth third, and consignment in terms of accounting.

I’ve also done a quick analysis of 5th 3rd (you get paid on the fifth day of the third month after product is delivered is how it was explained to me), and what I found is that if you’re doing your payments mostly that day, you actually have to keep average cash reserves equivalent to what you need for net 60, and your vendor is going to bill you for his interest cost as well—you don’t get delayed payment for free, unless you want to go bankrupt.

So I would submit that Christians really ought to consider the implications of what they’re doing regarding cash flow management, because this kind of thing is quite frankly embarrassing, and really doesn’t honor God.

Maybe they should try selling real books.

Now known just as Christian Books :

• Started in a garage
• Still just one location
• The Amazon-model … sell ‘em cheap
• Went from catalog sales to the Internet
• Their history w photos

Bert,

The problem came when 1) it was purchased by a individuals from a private equity firm in 2012. These Christian investors paid for the acquisition by taking on $34 MM of debt through the company. 2) the debt could not continue to be paid as sales continue to decline and the business makes no changes. Debt is not necessarily a problem in and of itself, but the way this was done was a mess.

David, agreed….mostly….I would suggest that if the means for paying off debt isn’t very obvious from the business plan and old results, then the debt is sinful. No? I personally think the commitment to give “all profits” to widows and orphans was a sign that they were not that serious about eliminating debt—because there are strict accounting/tax rules that note that prepaying debt is done out of profits. So their business plan locked them out of paying off debts. I personally see that as a problem indicating that the lenders should not have accepted their business plan.

Agreed as well with those who pointed out that their product is too heavy on “Jesus junk”. Maybe real books won’t support 266 stores, but I know (per Jim’s note) that I ave specifically chosen not to go into a number of stores simply because I knew I’d have an extremely difficult time—and a higher price than CBD—finding what I wanted.

When I saw the headline, I thought it was referring to CBD. Glad to see that isn’t the case.

[Bert Perry]

David, agreed….mostly….I would suggest that if the means for paying off debt isn’t very obvious from the business plan and old results, then the debt is sinful. No? I personally think the commitment to give “all profits” to widows and orphans was a sign that they were not that serious about eliminating debt—because there are strict accounting/tax rules that note that prepaying debt is done out of profits. So their business plan locked them out of paying off debts. I personally see that as a problem indicating that the lenders should not have accepted their business plan.

To a degree, you have to remember this is a business, which is a bit off from a personal debt. While I would agree corporations shouldn’t take on debt when they can’t repay, it gets fuzzy from a company standpoint. I do fully agree that this whole concept of paying widows and orphans and keeping debt was pretty messed up.

Generally speaking, the local Christian bookstore is one of the most dangerous places for your soul. Shelves are usually filled with more heresy than a Christian Science reading room. This company had “invested” in an “I Died and Went to Heaven” movie. We should pray that bankruptcy eventually forces them out of business.

Since all business debt ultimately comes out of the wealth of a person or persons, should we parse out Romans 13:8 into two areas? I’m thinking that that’s pretty dangerous to assume……while I’m all for charity, the business can only contribute to charity if it’s profitable.

And Donn, I wish I could argue with you, but I’ve had my nose full of “Jesus junk”. Sadly agreed—hope it’s repentance and not bankruptcy, but sadly agreed with you if that’s necessary.

Tyler: :^)

Do you really think this verse means “don’t carry a balance on your VISA card”, or “don’t get a student loan”, or “don’t get a mortgage on your house”. In Romans 13:7 Paul says to pay to all what is owed them. If you and them agree to a payment plan, so be it. The verse is fulfilled.

[Mark_Smith]

Do you really think this verse means “don’t carry a balance on your VISA card”, or “don’t get a student loan”, or “don’t get a mortgage on your house”. In Romans 13:7 Paul says to pay to all what is owed them. If you and them agree to a payment plan, so be it. The verse is fulfilled.

Mark, no, I don’t believe that a mortgage, student loan, or credit card (with or without carrying a balance) is unBiblical and inherently sinful. Be careful, make sure there’s a likely return, and such, but not inherently sinful. I would rather assume that Paul is telling the borrower to get out of debt if it lies within his power, as he is the “servant to the lender”, just as Paul tells slaves to buy their freedom if they can in 1 Cor. 7. In short, I think Scripture does teach that if it lies within one’s power to pay off debt (say without incurring another financial disaster in doing so), one ought to do exactly that.

Or, to use another Biblical picture, just as Joseph used the seven good years to prepare for years of leanness, so should we, and so should companies we own. I don’t object to the use of debt overall for the company, but rather that the stated business plan would prevent them from storing up in good years to prepare for lean ones. Plus, they are ignoring the principle of return on investment in that business plan—God has no beef with profits, or with people keeping some of them. See what I’m getting at here?

As an aside, I don’t believe Romans 13:8 teaches never to have debt. Over 40 years of marriage we have owned 6 different homes and had a mortgage on each of them.

I am reading a helpful book entitled Your Money Ratios (as an aside … I was able to buy it for 1 cent used … with shipping was under $ 4.)

In the debt section the author provides this test: “will debt help me from moving from a laborer to a capitalist?”

He views debt in two major categories: Income Producing and Income Reducing. He says “you can turn Income producing debt into income reducing debt if you take on too much of it” (p 76)

The key .. is the ratio of debt.

So in regard to mortgage debt (one of the 4 major kinds of debt individuals have: Mortgage, Transportation, Education, and Consumer), the key is to take on debt in relationship to income.

There are many rent vs buy calculators available. An example

Some examples that are helpful:

• Acquiring a reasonably priced car that provides reliable transportation to enable one to work would be an example of income producing debt.
• My daughter is borrowing money for tuition at MIT grad school. She has already been offered a well paying job and will start upon graduation. That’s an example of income producing debt.
• Excessive debt (a larger house than is needed or a fancier car) would be income reducing debt

I found this discussion (in the book) fresh and helpful.

As a personal note: We put as much as we can on a CC. I doubt we spend more than $ 20 in cash a month. We score the points. And we pay the CC off weekly.

Major corporations are selling bonds to gather in large amounts of cash. Two from just this week: Apple and Microsoft. They do sophisticated ROI calculations and conclude they can make money with borrowed money. Of course they are not financing a stupid movie like I Died and Went to Heaven

[Bert Perry]

Since all business debt ultimately comes out of the wealth of a person or persons, should we parse out Romans 13:8 into two areas? I’m thinking that that’s pretty dangerous to assume……while I’m all for charity, the business can only contribute to charity if it’s profitable.

And Donn, I wish I could argue with you, but I’ve had my nose full of “Jesus junk”. Sadly agreed—hope it’s repentance and not bankruptcy, but sadly agreed with you if that’s necessary.

Tyler: :^)

If it is a personal business where you are the owner, I feel this versed is more aligned.

I have difficulty aligning this to a large corporation that has multiple shareholders, some who are 1) made up of large institutional investors and/or 2) made up of investors who encourage debt, which may or may not be bad for a company. I believe that Romans 13:8 is geared toward a Christian believer as an individual, and not to a broad temporal institution. With all of that said, these were two Christians who took on a lot of debt to take over a company and then funnel profits not to pay down debt but to give away as charity. So I think that some elements apply to them.

I’d agree that we don’t try to apply this to nonbelievers as they run their businesses for the most part. That said, it should influence the companies we invest in, even if there are no Christians on the board, and then it should also influence us as we discuss matters of business with nonbelievers. Something like “given that our current economic crisis is in a nutshell a crisis of foolishly contracted debt, I get very uneasy when boards of directors allow executives to recklessly contract debt.”

Don’t mean to cause a kerfuffle here, but I think we need to develop a greater level of discernment in these issues in our churches and in our business lives. Put gently, it appears that investors are out close to fifty million bucks because they didn’t recognize an obviously screwy business plan as such.