Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1883-05-04
BUSINESS AND CREDIT.
some interesting Facts about Methods
OF business,

OF Business,
The mechanism of business and credit /,
intelligently explained by "a writer in til,
New York Times, who says:
by the recognized rules of trade the nor
maj credit is limited 10 80 per cent more thar
the capital of the house. To take 1t beyond
that limit reduces the rating of the house,
and makos the paper what, IN common par
lance, would be called 'risky.f In granting
credit the plan IS to allow 10 per cent for aii
Individual account. In other words, if the
capital OF a house is 500, 900, the seller will
grant credit to the extent OF $4,000. Thus
II would take 10 transactions to use IN the
entire capital, and in this way the individual
RISK would be reduced to what would be
called minimum. This is not always the
case, Tor very often in special lines If goods
the limit is exceeded, but 1t is the funda-
mental rule. a iobbng house will do n
business of 80, 600, 600 u year on Il clpiial of
81 ,OOO,0 COO, an investigator of credits OK.
planned. 1t lsvcry seldom that the volume
OF business year amounts TO over eight
times the capital invested.
The house will sell the goods GA 60 DAYS
llmc. 1t will pay for the goods on 30 days,
but 10 do this il must have its bills daird
February for the Spring trade but the bills
will date from April and May list. The
credit OF n wholesale house depends, natural
ly, very much upon the rate at which its
paper sells. Then again the money market
has certain influence which has TO be con.
siucrcd. since the commercial agencies
nave attained such magnitude the credits are
based largely on their Information. Owing
to the extent Of the country the individual
merchant can not keep track of the II sponsi-
Dllity OF the traders in the different States
VINO may desire 10 purchase of him. To
maintain lhcir own regulations the agencies
must strive for accuracy and trpstwOrhi.
ncss' anu, therefore, their reports have come
INTO widespread use. The establishment of
commercial IRA ings brings money that has
been retired into circulation. To such com.
paratlvc perfection has the system been re-
duced that the purchase Of mercantile paper
has been made Il safe and advantageous in.
vestmcnt.
merchant .rctircs with, perhaps, for
tune OF 81 300, 900. Government bonds and
Stocks he may think do not ray sufficient
amount for the use of his money. and he
luds ready market for it at g and 8 per
cent, in mercantile paper The method of
DOING business has greatly changed. The
1obOers take very little of their customers
paper to the banks for discount They hold
IT, aud deal in singlc.namc of their own pa.
per exclusively They are known, willie
their customers may not be. and the discount
on the lattcrs paper would be too great.
The practice of dating ahead las in some
measure taken the place of the old system of
selling goods, on six months credit, with The
privilege OF dlscountiug Al 30 days, at the end
OF which settlement by note was required.
Inc merchant then would take the note To
his banker and have it discounted. Under
lhc present plan, especially in the clothing
line, goods are sold ON four months time and
W days extra time without note. 50 that
credit to-day is as long in some trades AS be-
fore the panic. Th,res.cms, however. to be
AN Inclination to reducH the time on which
G )ods are sold
The rating of a new house quickly cstab
iisiieu. ii IL stait' ont with capital of
, iOo,OOO and buys 1900 900 worth of = ols
IL is considered 10 have done an iniudiciuus
thing, to say the least. 1t ought not TO buy
over sljO,O Of goods. Ii its transactions
arc at the rate of 5000 or $500, OOJ a
year 1t VIII soon have $4,000 trusted out.
me start on borrowed capital curluls the
credit. lndcr ordinary circdmqtlnccs the
credit allowed in such cases is only two |
thirds of the capital AID the chances of the
success OF house are greatly diminished |
Three persons started a house Jan. / with "A |
capital Of $50, coo. Each put in so coo |
which he hal borrowed III, l,ancrs s,ipu. |
lated that the money should b" at the risk of |
Tie business un'ii 1885. In tAcr wo.d.. if |
inc business absorbed the capital bel! ne ,h,
lihc me loancrs could not step in to save
themselves, but at the expiration Of that
pefiod tlty could step in and close up the |
business II they saw tit. This is an ilhistra. |
in 4, d
figures in the mercantile trade.
Until the evcntiul day is passed the life of |
such house is uncertain, aud il must labor
under many disadvantages. Without good
credit tIe house can not extend its business, |
anu without confidence it can not Obtain
credit. The commission business is looked |
upon as the safest. A commission house will |
make arrangements with mil for it TO pro. |
iuce 5000 OOJ worth ol goods. As soon asa
OF MERCHANDISE is delivered TO the
commission merchant h. gives his acccptauCc |
IN 'hc shape oi note nj from thirty days to |
tour months at from onr-third 10 thrce-!oilrths |
Of the value OF the goods The goods are |
held as security. The merchant sells the |
soods al rom D to y per cent commission. |
aud receives the interest on his advances |
The commission merchant paper sells nj f,. |
Vorallc rates, because the miller can not fail |
anu leave lin unsecured. The profits of the |
commission merchant are not large, but the
volume of bus'tcss is heavy aud the risk
light
Where the pccularitics of tn. credit sys
lem are best shown is in the advantages and
disadvantages of the use Of paper. The reg.
hlar rate OF discount on purchases is II Der
cent per annum. house whose standing
enables It to sell its papers at per cen, dis
count, which is considered a first class rate,
'an negotiate lis notes ut the time of making
Is purchase, aud secure the discount ON the
iill. 10 such II sr,a' extent is paper used
NAT many merchants make a study of the
most favorable way of creating a market fnr
heir paper. 1t is the perfection to which
he system has been brought that keeps bust
ie-s Ia such m even channel and prevents
disasters.