The Dawson news. (Dawson, Ga.) 1889-current, 1917-05-08
Discounting a Note.
From the American Banker.


1t so happens in business that all pay
ments cannot be made in cash, for most of
the business is done on credit in one form
or another. Small purchases and MANY of
the daily expenditures are cash transac-
tions; but business as a whole moves on
credit, the form depending upon the GUS
toms characteristic of that peculiar bust
ness. The most common form of credit is
the book account, where goods are sold and
charged" to the purchaser. When you 90
into the grocer's and tell him to charge it."
you are opening a credit with him in the
form of book account This is common
to all retailing transactions. But in the
larger dealings, the credit is in the form of
promlssory note, which is merely a writ
ten promise to pay certain sum, in money.
to designated person, firm or corporation,
at stipulated time. Hundreds of thou
sands of these notes are made every dav
They are given, merchant to merchant, in
payment of debts resulting from the sale of
goods, and while they settle the debt must
themselves be paid in money, in order that
the obligation may be finally discharged,
for promise never liquidates debt.
II these promises could be treated as
money and passed from hand to hand, thew
might answer very well, but they are of
non-unlform denomination, their goodness
is matter not commonly known, and even
though the maker might be "as good as the
government" few know it and few would
take the risk
And if the holder could wait until ma
turlty, he would get cash from the prom
User. But he does not want to wait that long
he wants to turn his evidence of debt into
money at once, for which money-real
money-he can get better terms, and for
certain purposes, such as paying laborers. he
must use cash. There must, therefore. be
some medium through which he can turn
TINS promise into money before it is due
Tor prlce-and that medium is the bank,
The process of doing this is called dis
counting, which IN other words means buy
explain.
Suppose sells bill of goods on three
months credit. A does not want to wait
While b sells the goods and gets the money
to pay him, and therefore offers to take
BIS note for the amount. But the note is
not money, and if A would use the money,
he must find some one who will give him
money for it. He might find some one who I1,I
Tor the nope OF gain, would advance the
money; but the logical place to get this
done is the bank, for the bank always has
money. 1t knows men and their ability
20 keep their promises, and can judge the
quality of the risk. A therefore offers
Vic AoCe 10 MS banker, VINO says in sub
amount. If you will indorse-promise to
pay, if he does mott will buy that paper
evidence of debt from you" Let us say it
IS for 500, due in three months. The bank
er knows that at the end of three months
he will get the 500, and so gives A sos. so
for it, the $3.50 being interest on the money
for that time at 6 per cent. Ordinarily the
banker would not give A the cash, but credit
his account, with the privilege of checking
against it, which is virtually the same thing,
Now, what is the result? B had three
months to sell the goods to get the money
to pay the note when the banker presented
it at maturity. A could use the $98.5O to
buy more goods to sci to C, and the bank
has made profit of $3.50 for taking the
risk That is what a bank is for-to take
risks, to know men, to help business and
make profits for itself. And this it does to
very marked degree. We could not do
business very well without this help. It is
one of the indispensable adjuncts of bust
ness. The promises of business men held
In the national banks of the country alone
amount to over three billion dollars