Clinch Valley news. [volume] (Jeffersonville, Va.) 18??-2019, 1916-10-13
SHORT-TIME LOANS
Size OF LOnn and Purpose for Which
Employped Have Direct Bearing
Upon Rate of lntcrest CHARGED

Every farmer before boring money
should ask himself certain questions,
according to Bulletin No. 400, Fac
tors Affecting Interest Rates and
Other Charges on Short-Time Farm
Loans, recently published by the de-
pnrtmcnt. Very often the farmer who
does not ask himself these questions
may find that the bnnker will re-
qliirc answers before he makes the
loan.
I" As the Importance Of promotions
and encouraging improved system of
farming becomes increasingly np-
parent" to quote the bulletin, "ntten-
ton will he directed more and more
toward such questions Ms the pur-
pose and size of farm loans. How
are the proceeds of II proposed lonn
to be employed? Are they to be ex-
pended For the productive purpose,
such rs would lend to Improvement
in the farming business? is the size
OF the loan well adapted to the pur-
pose in view? Does the period for
which the loan is to run conform TO
the time the capital is actually need
ed! All of these questions have Il
direct bearing on the costs OF short
time farm loans?
Purpose of the Loan.
The use of any given loan ought
TO yield Il return sufficient mt lenst
TO repay both interest and principal.
II the returns are not sufficient for
this purpose, then the money should
not be borrowed The only way in
which the use Of credit can be dir
ected so as to serve the interests of
Improving agriculture is to control the
extension. of loans so that they may
be used for productive purposes only.
This means, ut the same time, safer
use of credit.
"ln some localities banks offer
loans to farmers ut reduced rates of
interest when the money borrowed
is used for some specific and an
proved purpose, such as the purchase
OF live stock, the building of silos, or
the making of other improvements
which will make farming more pro-
'itable under the given conditions.
Size of the Loan.
The banker usually charges a
higher rate Of interest OH small
loan than on large one. The cler-
ical and bookkeeping expenses are
the. same in both cases. Unless q
higher rate were charged on small
loans, the point would be reached
where the expenses connected with
such loans would be greater than the
interest. On the other hand, it pays
banker to handle large loans at a
lower rate of interest.
The Importance of restricting
loans to those for approved productive
purposes and of having the size of
the loan conform to the requirements
OF sound farm investment has been
recognized by some bankers to such
an extent that they employ advisers
who discuss such questions with their
the interests of their farm-loan bust
ness This plan has been followed
by banks in the Central West, in New
| England, and in the South. The plan
of one of the southern banks may be
taken as an example. The agri-
cultural adviser employed by this bank
after conference with the prospec-
tive borrower, decides whether the
proposed loan is businesslike an ex.
pcdlent. If the purpose of the loan
meets with mis- approval he works ont
a plan of procedure with the farmer.
| The farmer may consider that he
needs loan of $1,000. AS a result of
his conference with the adviser it
may be found that $700 is sufficient.
They, discuss the safety of the pro
posed investment, the additional
equipment necessary, and, in case of
live stock is to be purchased, the crop
rotation that will furnish the most
economical supply of feed. These
items are all arranged and agreed upon
before the bank makes the loan. After
the loan has been made and the capt.
tai invested it is the duty of the ad-
wiser to visit the farm from time to
time to see if the plan adopted is ad-
hered to and if the investment is
yielding proper results. Such plan
means added protection to both the