Free trader-journal. (Ottawa, Ill.) 1916-1920, 1918-10-07
ACKNOWLEDGEMENTS
Purpose and Size
OF Farm Loan
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Washington. ID. C.-Every farmer
before borrowing money should ask
himself certain questions. according
10 Bulletin No. 400. Factors Affect
ing Interest Rates and Other Charges
Oh Short-Time Farm Loans. recently
Published by the L. S. Department of
Agriculture. Very often the farmer
WHO does not ask himself these Ques.
tins may find that the banker Will
require answers before he makes the
lean.
AS the importance OF promoting
Fud encouraging improved systems OK
farming becomes increasingly appar-
emit TO quote the bulletin, "atten'
ton will be directed more and more
toward such questions as the purpose
and size Of farm loans. How are the
proceeds OF proposed loan TO be EN-
rlOyed? Are tney to be expended for
= productive purpose, such as would
lead TO Improvement in the farming
business? Is the size I the loan well
adapted 10 the purpose in view! Does
tie period for which the loan is TO
run conform 10 the time the capital
is actually needed? All of these ques-
lions have direct bearing on the
costs Of short-time farm loo S.
Purpose Of the Loan.
The use OF any given loan ought TO
pay both interest and principal If
tie returns are not sufficient for this
purpose. then the money should not
borrowed. - only way in VI ch
the use OF credit can be directed so
as TO serve the interests OF improved
agriculture is 10 control the extension
of loans so that they may be used for
productive purposes only. This means,
at the same time. a safer use Of
credit.
In some localities banks offer
loans to farmers at reduced rates of
interest when tn. money borrowed Is
used for some specific and approved
purpose, such as the purchase OF live
stock, the building Of silos, or the
making Of other Improvements which
will make farming more profitable IN.
der the given conditions.
Size OF the Loan.
The banker usually Charges a high
er rate Of interest on small loan than
on large one. The clerical and book
keeping expenses are the same in both
cases. Unless 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 9th,
er hand, il pays the banker to handle
large loans at lower rate OF inter.
est.
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 rec
oenized by some bankers to such an
extent that they employ advisers W.
discuss such questions with their farm
er patrons in order to promote the
interests of their farm-loan business.
This plan has been followed by banks
in the Central West. in New Eng.
land, and in the South. The plan OF
one of the southern banks may be
taken as an example. The agriculture
adviser employed by this bank, after
a conference with the prospective Dor.
rover. decides whether the proposed
len is businesslike and expedient. Ii
the purpose OF the loan meets with his
approval, he works out a plan OF pro.
&C IRE 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
$500 is sufficient. They discuss the
safety of the proposed investment, the
additional equipment necessary, and
in case live stock Is to be purchased
the crop rotation that will furnish
the most economical supply OF food
These items are all arranged and
agreed upon before the bank makes
the Loan. After the loan has been
made and the capital invested it is the
outy OF the adviser to visit the farm
from time to time to see if the plan
adopted is adhered TO and IL the in
vestment is yielding proper results.
such plan means added protection
to both the farmer and the banker"