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Financial: How changes in tax law will affect dealers

February 5/12, 2018: Volume 33, Issue 17

By Bart Basi


(Second of two parts)

In my previous column, I broached the subject of the passage of the Tax Cuts and Jobs Act—also referred to as the Tax Reform Bill—and what the changes mean for small businesses and retailers in the floor covering space. In this installment, I will delve deeper into the benefits of the law relative to how a business is structured.

One of the biggest changes in the law relate to Subchapter S corporations. (Most of my clients in the flooring space are Subchapter S.) If a business is registered as a Subchapter S corporation or a partnership 20% of an income calculation (not 20% of profits) is not subject to tax.

What that means is, if a large company is a Subchapter S corporation, then its taxes essentially decrease from 35% to approximately 29.7%. (Note: This is the maximum rate—it could actually be lower than 29% but it will never be less than 21%.) It’s still higher than a C corporation (21%), but it does help small businesses that are Subchapter S corporations or partnerships that want to stay as they are.

But what happens if you’re not classified as a Subchapter S corporation or partnership? For example, take limited liability corporations, or LLCs, which, are still very popular with people mainly because there is no tax rate applicable in the U.S. for LLCs. Accountants who advise business owners who operate under this structure ask that owners make a choice between paying taxes as an individual proprietor of a Schedule C, a Subchapter S, partnership or C corporation. In other words, the federal government states that if you are an LLC, the accountant is supposed to check a box that essentially says, ‘We are a limited liability company but we’re going to pay taxes as…” At which point the owner of the business files the appropriate tax return. Remember: There’s no such thing as a tax return for an LLC.

But it’s important that small businesses operating as an LLC remember they cannot use anything other than the letters “LLC” when referring to their company. Also, the letters LLC must appear on every single document in order to enjoy the protection it affords. The law states that if you operate as an LLC, then you must notify every single person you deal with—right down to the stationery, business cards, invoices and even truck signage you use. Otherwise, a third party can sue you personally because you haven’t shown that person—as a customer—that you’re an LLC. Note: A lot of people in the flooring business use a “dba” (or doing business as) designation. Warning: LLCs cannot use dbas; they will lose the legal protection of the LLC if they use the dba. Many flooring retailers who operate under this classification are not aware of the rule.

It’s also important to note some of the laws regarding LLCs are changing; specifically, a proprietor of an LLC can longer have an individual listed as an owner. There must be two people on file as owning the company, or else the government will claim it’s a de facto company and therefore defaults the company to a Schedule C on the tax return. This means everything will be taxed, including social security.

LLCs are good as long as people understand three things: 1) make sure the accountant knows which tax return you intend to file, i.e., “check the box”; 2) do not use a dba; and 3) make sure the state in which you are incorporated allows one person to own an LLC and still be a legitimate company.

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Credit: The importance of offering financing to consumers

February 5/12, 2018: Volume 33, Issue 17

By Rose Burke


When consumers shop for big-ticket items such as new flooring, they are likely to use some kind of credit to make the purchase. What’s more, some credit experts believe people are far more compelled to commit to bigger purchases when they can see their payments broken down into monthly installments instead of seeing the total amount. For example, a $7,000 purchase might not be affordable for most people, but a $400 monthly payment can appear more manageable.

While it is important for retailers to consider offering credit terms to their consumers, it is also crucial they’re offering attractive financing that will actually bring people into their store. What makes credit terms attractive differs from dealer to dealer, industry members say.

“Our financing programs are available on all purchases in the showroom, not limited to just one display or manufacturer,” explained Keith Spano, president of Flooring America. “This gives our retail sales professional the ability to move a customer up and down through the trade-up process without fear of losing the favorable payment terms.”

Other retailers are providing their customers with several credit options in order to make them more attractive.

Ari Ziskin describes the credit terms at Mesa, Ariz.-based Flooring Inc., as transparent, saying, “Our goal is always to make the purchase process as easy and stress-free as possible. One way we do this is by offering several financing options. As a company offering high-value items, we believe this is incredibly important to both the customer experience and continued sales growth.”

When customers walk into a jewelry store or car dealership, they’re often provided with credit terms that lead them toward making a purchase, and flooring retailers should be no different. “Offering credit lets our customers know they can get the flooring they want on good terms, which opens the door to other parts of our business,” said Bob Pireu, president of Bob & Pete’s Floors, Canton, Ohio. “Customers know they are getting a competitive price, plus they can be comfortable with the quality of our services and installation.”

Other retailers have also learned to leverage consumer financing to their advantage. “We have always been a huge proponent of consumer credit financing and the benefits that come along with that,” said Eric Langan, president and owner, Carpetland USA (Langan Group), Davenport, Iowa. “This includes larger average tickets, reduced accounts receivables and differentiation among competitors.”

In addition to being a proven sales tool, credit is something customers have come to expect and is almost no longer an option, Spano said. “Retailers need to look at financing costs as a marketing cost and a cost of doing business in a competitive retail landscape.”

As a recognized sales technique, retailers who have trained their sales staff on the appeal of their credit terms have seen a significant increase in sales. “We’ve spent considerable time training our members and retail sales professionals to discuss financing early and often in the sales process.” Spano said. “Through our training and aggressive buy-downs for our members, we’ve seen our financed sales grow to three times that of the industry while also seeing our average ticket grow almost three times our average credit card sale.”

The most common credit terms offered by flooring retailers is 12-month financing. This breaks down payments into a few hundred dollars a month, but still, retailers hope to see more attractive credit terms for their customers in the future.

“Can you imagine advertising putting hardwood in your whole house for $149 a month?” said Adam Pace, CFO at Metro Floors Inc., Lancaster, Calif. “This would be possible if we had 48- or 60-month financing. It would be a huge boom for the industry. We can offer 36-month financing as it is now, but the cost to the dealer makes it a no-go. The manufacturers need to set-up their own credit unions, especially those that are multi-billion dollar companies.”

Synchrony Bank is a popular option for retailers seeking to offer appealing credit terms to their customers; they offer over 100 different kinds of credit cards and work with dozens of major retailers. With a specialty program specifically designed for flooring retailers, Synchrony  can offer solutions that other banks cannot.

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Al's column: Navigating through tax, legal issues

November 20/27, 2017: Volume 32, Issue 12

By Roman Basi


Screen Shot 2017-05-15 at 9.35.04 AMA client recently asked me if it was necessary to file IRS form 1065 for people who operate as a “small partnership.” This is a question you might be asking yourself if you are one of the many people in this country who operate your business as a partnership. The answer is yes, no and maybe.

A simple understanding as to what the IRS wants comes in a report of some form or another that the IRS approved. Regardless, the fact is you must file taxes every year as either a partnership or an individual. If the deadline cannot be met, you can apply for an extension under certain circumstances, which includes being unprepared to immediately pay taxes. With regards to partnerships, it is your size (the amount of partners in the business) that determines the type of report to be filed and whether you will be subject to penalties and interest if you fail to file that report on time. Whether it’s in the form of personal income (schedule C) or a 1065, the IRS writes the rules and punishes those who fail to comply with such rules. However, to help comply with IRS rules the IRS has provided Revenue Procedure 84-35. (Oftentimes, the intricacies of the tax code are buried deep within various IRS manuals.) Created by the IRS in 1984, Revenue Procedure 84-35 contains a reasonable cause exception that a small partnership can employ to avoid the tax penalties levied for failure to file a partnership return. However, when making use of this procedure, it is extremely important to understand the factors that qualify an entity as a small partnership.

Screen Shot 2016-07-15 at 3.49.34 PMSecond, it’s vital to consult a professional who understands the case law that interprets the parameters of how to properly employ the procedure. Take, for example, the confusion that exists surrounding small partnership and tax filing requirements. An exemption exists under 26 U.S. Code §6698(a), which can be summarized by stating that the mandatory penalties associated when a partnership fails in a requirement provides that, except for willfulness, if a partnership is required to file a return under Code Sec. 6031, yet fails to file on time including extensions, the partnership is liable to severe penalties unless the failure is due to “reasonable cause.”

Clearly an exception for reasonable cause exists; however, the question becomes what is a reasonable cause? To answer that question, you must have someone equipped to understand the accounting aspects, corporate structures and legal knowledge to interpret the law and ensure tax preparation perfection.

Do you know the ins and outs of your corporate structure? Are you equipped to interpret case law that dictates the meaning of IRS statutes? If the answer to these questions is no, it’s highly likely a competent tax professional could improve your businesses in a number of ways.

Additional analysis is often required to determine the relief afforded under such exceptions. For instance, Part 20 of the IRS Manual contains a set-aside for penalties and interest. There we find the full definition and more insight as to the question of relief under reasonable cause. IRM lays out the full parameters of Rev. Proc. 84-35, but also provides guidance in regard to 6231(a)(1)(B), which exempts certain small partnerships from the penalties for failure to file; however, they are not automatically exempted from having to file. These exemptions are important to be aware of and could help you avoid costly penalties.


Roman Basi is an attorney and CPA with the firm Basi, Basi & Associates at The Center for Financial, Legal & Tax Planning. Be sure to attend his presentation on Tuesday, Jan. 30 at TISE, where he will discuss different ways retailers can reduce their taxes while protecting their assets.

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National Karastan Month celebrates signature style, consumer savings

NKM Fall 2017 logoCalhoun, Ga.—National Karastan Month kicked off Sept. 21 and runs through Nov. 7. This annual celebration of the distinctive luxury brand offers consumer savings and extensive promotional campaigns for Karastan retailers nationwide.

Consumers can take advantage of Karastan’s promotional pricing on select Karastan styles ranging from beautiful wool carpets to family-friendly SmartStrand Forever Clean styles. Participating retail stores also will be offering special financing.

To assist in driving the success of National Karastan Month, retailers are provided exclusive Promoboxx campaigns for sale content as well as consumer-facing promotion from Karastan’s Live Beautifully blog. In targeting local traffic for retailers, Karastan’s proven Lead Booster drives leads through Google and Bing to connect consumers and retailers directly.

“National Karastan Month is a true reminder to live beautifully,” said Bill Storey, senior vice president of Karastan. “Karastan is known for high style and evolving with the latest trends. It is a brand that can create aesthetics from family living to a romantic escape. National Karastan Month is our way to say thank you to Karastan lovers and our Karastan retailers with the products that have shaped our brand and homes everywhere.”

For consumers waiting for this special pricing period, Karastan’s select partnership with Synchrony Financial allows shoppers to take advantage of “36 Month Equal Payments No Interest” financing as well as the Karastan Credit Card to make National Karastan Month purchases even easier. Both are available at participating retail stores.

For more information, visit

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Credit: Retailers offer financing tips to entice larger purchases

January 30/February 6, 2017: Volume 31, Number 17

Screen Shot 2017-02-03 at 4.20.56 PMFor dealers like Mark Hayden, Carpet One Floor & Home, broaching the subject of credit and financing options frequently throughout the sales process is key to persuading the consumer to make a larger purchase than she initially planned. “Bring it up at the origin of the discussion when you start working with your customers, and bring it up another time during your conversation,” he explained. “Sometimes telling something to someone a few times will make it better understood and remembered in their minds.”

Evan Blanchfield, Campbell’s Carpet in Port Washington, N.Y., employs a similar strategy. “Let the customer know [credit] is available early on because then you can probably get a bigger purchase if something is out of her budget,” he said. “If your consumers know financing options are available from the start they know it’s within their reach.”

Some dealers look to influence the customer long before she enters the store. Carpetime in Grand Junction, Colo., for example, utilizes the web to educate shoppers about credit terms. “It’s worth mentioning [online] you offer financing that determines whether they come into the store or not. We like to let customers know it is available if that’s what they want and it’s one of the main things they are looking for.”

Jim Jensen, owner of Carpet Mill Outlet Flooring Stores, Denver, cites the importance of promoting credit opportunities through a variety of media. “We have found success with web and social promotions along with salespeople and POP materials. When you add mentions in the mass media like broadcast TV, cable and radio, we find the blanket coverage of all available media is the most effective approach.”

These are just some of the ways specialty retailers are successfully promoting credit in their stores. While the specific strategies might vary slightly from store to store, the common denominator is the sheer availability and access to retail financing options. From credit programs negotiated directly with banks and financial institutions to those offered in conjunction with manufacturers, there is no shortage of choices for specialty dealers.

Communicating this availability of financing consistently across all marketing channels is key to building greater awareness among flooring shoppers, experts say. This includes using promotional vehicles that fall outside of traditional mediums. “Using Facebook, websites, radio, mailers, banners, TV and newspaper advertising to promote our branding shows our customers we are consistent with our ability to finance effectively,” Tom Garvey, president and CEO of Lewisburg, Pa.-based Garvey’s Flooring America, told FCNews. He estimates approximately 30% of sales are generated from purchases financed over a 12-to-24-month time frame.

Consumer research supports the relationship between active promotional credit initiatives and big-ticket purchases achieved via financing. For instance, the findings of a recent survey conducted by Synchrony Financial—which offers credit programs for retailers and consumers alike—show 65% of respondents in the flooring category “always” seek promotional financing options when making a major purchase, while 72% indicated promotional financing makes large purchases more affordable.

Despite these numbers, experts say there is room for improvement. That same study revealed 32% of flooring shoppers who are not Synchrony Bank cardholders reported awareness of financing options compared to 58% last year. According to Glenn Marino, Synchrony executive vice president and CEO, payment solutions, this means retailers need to do better at integrating credit information across multiple channels.

The good news for retailers is consumers are indeed actively seeking ways to finance their flooring purchases. According to Synchrony Financial, roughly two-thirds of flooring shoppers conduct research through search engines, the retailer’s website and manufacturer sites. Another 34% also leverage third-party online review sites. “Integrated campaigns across email communication and retail site advertising also reinforce dealer participation and broader brand messages to help build incremental awareness among consumers,” Marino explained.

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Credit: Financing options help consumers buy more

October 10/17, 2016: Volume 31, Number 9

By K.J. Quinn

screen-shot-2016-10-17-at-10-28-52-amRetailers are challenged to increase awareness of opportunities to finance flooring purchases, which plays an important role in the shopping experience. Promoting these programs is a necessity during a time when most customers conduct research, including credit options, before stepping foot inside the store.

“Our retailers continue to tell us that offering consumer financing in today’s retail landscape is a must,” said Susan Hahn, director of new business development at Mohawk, which offers a private-label credit card. “Finance plays a major role in the consumer’s decision-making process and is a determining factor in where they shop and ultimately buy.”

More importantly, the availability of credit programs raises the potential for larger purchases. “On average, a finance transaction is eight times the size of an order paid in cash and four times the size when paid with a credit card,” said Aaron John, director of flooring network and retail programs at Shaw.

The proof is in the pudding, as evidenced by Synchrony Financial’s Fifth Annual Major Purchase Consumer Study. The Synchrony cardholders survey, conducted June to July 2016 by a third party, found 65% of respondents in the flooring category “always” seek promotional financing options when making a major purchase while 72% indicated promotional financing makes large purchases more affordable. “Research snows 32% of flooring shoppers who are not Synchrony Bank cardholders reported awareness of financing options, compared to [58%] last year, indicating retailers need to do better at integrating credit information across multiple channels,” said Glenn Marino, Synchrony executive vice president and CEO, payment solutions. (Both Shaw and Mohawk work with Synchrony Financial to provide credit options to the consumer.)

As consumers become more decisive, they may be influenced by the amount of information found during their research process. “Consumer financing should be part of your consistent messaging in all advertising mediums, whether traditional or digital,” said Keith Spano, president, Flooring America/ Flooring Canada, a Manchester, N.H.-based retail group. “Obviously, the best scenario occurs when—through our advertising—a customer comes onto our site and gets approved online for a Flooring America/Canada credit line.”

The consideration cycle for flooring shoppers is significantly shorter—dropping from 90 days in 2015 to 67 days this year, according to the study. As a result, dealers are encouraged to integrate credit and financing offers early and often, especially on their websites. “[This] makes it easy for flooring shoppers to find the information they are looking for during their search and can help ensure a flooring retailer is part of the customer’s consideration set,” Marino said.

Communicating the availability of financing consistently across all marketing channels is important and helps build greater awareness among flooring shoppers. “Using Facebook, websites, radio, mailers, banners, TV and newspaper advertising to promote our branding shows our customers we are consistent with our ability to finance effectively,” said Tom Garvey, president and CEO, Garvey’s Flooring America, with locations in Northumberland and Bloomsburg, Pa. These marketing efforts are successful, he said, noting approximately 30% of business from purchases financed over 12 to 24 months.

Jim Jensen, owner of Carpet Mill Outlet Flooring Stores, Denver, cites the importance of promoting credit opportunities through a variety of media. “We have found success with web and social promotions along with salespeople and POP materials. When you add mentions in the mass media like broadcast TV, cable and radio, we find the blanket coverage of all available media the most effective approach.”

The vehicles retailers employ to promote financing options are ever changing. “Much of the traditional ways of advertising, like newspapers and inserts, do not work as well as they did years ago,” reports Tom Urban, general manager, Great Lakes Carpet & Tile, with three locations in central Florida. “Finding ways through social media and in-store events can be challenging.”

screen-shot-2016-10-17-at-10-31-19-amThe survey reports roughly two-thirds of flooring shoppers conduct research through search engines, the retailer’s website and manufacturer sites. Another 34% also leverage third -party online review sites. “Integrated campaigns across email communication and retail site advertising also reinforce dealer participation and broader brand messages to help build incremental awareness among consumers,” Marino said.

All of which makes it important for credit options to be readily visible with all product specials, sales and promotions. Approximately two-thirds of flooring shoppers decide on their payment method before entering the store to buy, an indication salespeople must be prepared to address queries on financing options. “Sales associates are always asking for payments or deposits from consumers and need to make sure financing options are offered right from the beginning,” Urban said.

While prime lending offers help lure customers inside the store, educating consumers about how financing options can increase their buying power is an integral part of the selling process. “Proper training of your staff, coupled with ensuring they offer financing at every customer touch, is crucial to any credit program’s success,” said Michael Fredricks, senior vice president of business development at Fortiva Retail Credit.

Lending plans range from private-label credit cards, deferred payments and same-as-cash, which provide consumers with low monthly payments and extended financing. “We have seen retailers creating a buzz to drive traffic in the door via extended deferred interest periods—no payments for ‘X’ amount of years, product discounts [such as] ‘buy one room, get another room free,’ seasonal messaging, etc.,” Fredricks said.

It’s not uncommon for shoppers to leverage credit to upgrade to better quality products or purchase additional flooring. The study found cardholders spend an average of $416 more than non-cardholders. “The fact remains, when a customer engages with our consumer financing, she’ll buy better product than she anticipated, or will purchase more product for more areas of the house than she originally planned,” Canada’s Spano said.

Financing plans make it easier for most consumers to spread out payments for their flooring purchase over a number of months while helping dealers create a platform for building their business. For example: Great Lakes’ Urban recalled a situation involving a couple who initially chose a one-year, no-interest financing option to purchase carpet for their master bedroom. “I also mentioned to them that I had the measurements for the other rooms to see if they were interested, at that time, to do more flooring. They said no, but they would keep it in mind for possibly later next year.”

Fast forward 45 days later, Urban said the couple called after receiving their paperwork from Synchrony and decided to purchase the rest of the flooring that was measured. “My original order was for $1,138, but the last invoice was $2897.30,” he noted.

While there is no one-size- fits-all credit program, lenders can recommend an approach that fits a retailer’s sales model and provide assistance for optimizing results. “Synchrony Financial’s marketing teams understand flooring shoppers’ path to purchase and work with flooring retailers to help build customer awareness across multiple channels, including integrating financing options with online advertising, retailer site finance landing pages, print advertising, retailer POP materials, and any radio or television advertising,” Marino said.

Fortiva’s retail credit program allows participants to close one out of three customers they are losing today. “[This] equates to a 10% to 20% increase in financed revenues to your bottom line,” Fredricks explained. “This simultaneously promotes employee retention with higher sales commissions and increases customer satisfaction and loyalty.”

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Credit: Taking advantage of financing

October 12/19; Volume 30/Number 9

By Nadia Ramlakhan

Screen Shot 2015-10-16 at 1.33.20 PMThe consensus among retailers who successfully integrate financing into their businesses is that it is a win-win for everyone involved. With credit, the consumer has more options to choose from because price is no longer an issue. And from a dealer’s perspective, there are a number of benefits that coincide with offering financing programs, including an increase in the average ticket, more foot traffic in the store and, ultimately, bigger profits. For those retailers who are still unsure of how to gain from financing, FCNews rounded up some advice from top dealers and executives across the country.

Switch things up

Modern consumers have come to expect financing offers on large purchases whether it is furniture, electronics, a car or flooring. With that, dealers should always have at least one offer available—but remember to vary the terms and conditions during key sales events, product launches and busy buying seasons to create a sense of urgency. According to most flooring retailers, customers are more likely to buy when they know the offer is only available for a limited time.

For Kevin Rose, president and owner of Carpetland USA with two Illinois locations, changing the store’s financing offer every other week works best; after all, a special isn’t so special if it is available all the time. “It’s just a matter of switching it up and having something available,” he said.

Early, often in the process

It seems the golden rule of financing is to talk about it early and often during the sales process. Mentioning it throughout the conversation helps ease the consumer into the idea of low monthly payments, which opens the door to more expensive items. Some dealers make the mistake of positioning financing as an afterthought, or an option that only becomes available if the customer is interested in an item above her budget. “The key to financing is making it a part of the sales process,” said Keith Spano, president of Flooring America. “It can’t be something that’s brought up at the last minute; [it should be presented] early and often throughout the sales process.”

Kurt Duitsman, owner and president of Floors For Living with 16 locations throughout Texas, introduces his special financing options during the initial greeting with a customer. “To be successful at financing you should mention it at the beginning and end of the sale. In every greeting you must say, ‘In addition to our low sale prices you also get up to four years of free financing,’ [for example]. At the end of the sale you must ask, ‘Did you want to use free financing or would you rather pay cash?’”

In-store visibility

The Internet has made it possible for customers to browse product selections online before stepping into a brick-and-mortar location. This means that once she is in store, she has already done her research and is ready to purchase. Displaying signage and other traditional POP materials in the showroom helps keep financing top of mind for consumers.

For dealers who want to take the subtle route, Scott Perron, CEO of 24-7 Floors in Sarasota, Fla., recommends having sales associates wear lanyards around their necks that read, “Ask me about our 12-month financing” or similar promotions. “It’s much better when it’s the customer’s idea. If you have it hanging around your neck it won’t seem like you’re trying to hammer her and it gives her an opportunity to ask you about it before your hard sell.”

Find the right partner

Different buying groups, banks and manufacturers work diligently to develop plans that appeal to both retailers and consumers in the flooring industry. Because each market has specific needs and preferences, a dealer should find out which partner and plan will work best for him. For example, some companies offer aggressive buy downs and low rates while others provide tools to help with in-store promotion and lead generation.

When it comes to finding the right program, research shows that longer terms and lower monthly payments are more appealing to consumers; however, dealers need to be wary of incurring costs. “Partner up with a bank that can offer [what you need],” said Barry White, owner of Carpeteria in Lancaster, Calif. “Most people that do financing are not as concerned about the total price as they are the payment.”

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How to successfully integrate financing into your business

Volume 27/Number 26; April 28/May 5, 2014

By Jenna Lippin

Screen Shot 2014-05-05 at 3.51.18 PMWith a promising economy prompting consumers to get out and buy, many are looking—and are encouraged to—spend “other people’s” money. Retailers need to be ready for the release of that pent-up demand, and with that comes providing credit and financing options to help seal the deal.

“[Credit utilization] absolutely correlates with the economy being up,” said Keith Spano, president of Flooring America. “During the recession you heard everywhere that credit is bad. People have come around, credit has eased a little bit, and shoppers have more control. Consumer debt is at a low, so people have a different mindset. The smart consumer is going to use someone else’s money, especially when it’s free.” Continue reading How to successfully integrate financing into your business

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Beaulieu announces $230 million in loan refinancing

DALTON—Company officials at Beaulieu of America announced the securing of $230,000,000 in loan refinancing. Ralph Boe, president and CEO of Beaulieu of America, said in making the announcement “We are now poised for continued growth in the current marketplace. And as the largest privately-held carpet manufacturer in the U.S., Beaulieu will continue to focus on the needs of its customers to be the ‘supplier of choice’.” Continue reading Beaulieu announces $230 million in loan refinancing