Washington telegraph., 1923-07-20

for the Use of the money, He then
credits Mr.. Smith with the proceeds
of the note, or s495. When the note
is due in sixty days Mr.. Smith has re-
celved payment from his customers,
and he pays the bank $500. The
bank marks the note paid and returns
II to Mr.. Smith.
II Mr.. Smiths business condition
were not sufficiently strong to war
rant granting him unsecured credit the
banker might say to Mr.. Smith, 81 want
to help you, but you will have to get
the Endorsement Of your friend, Mr..
Jones" Jones is known to the bank
er as a very reliable and responsible
business man. Should he be willing
to help Mr.. Smith he will write his
name on the back Of iIr. Smiths note
and II Smith cannot pay the note
when due Mr.. Jones will have to pay.
In another case the banker, still
anxious to help Smith, Light say, 81
am willing to loan you up to $4,000
but you must secure the loan with the
goods which you purchase for that
amount and with some additional
goods" Mr.. Smith would have to
warehouse the merchandise used as
collateral In such a way that 1t might
be easily identified through ware.
house receipts as being the banks
property until the note is paid. II
Smith finally found himself unable to
pay, the banker could sell the mer.
chandise and use the proceeds to pay
the note. II the goods brought more
than the amount Of the note the bank
would pay the excess to Mr.. Smith;
II the amount were not enough the
bank would look to Mr.. Smith to
make good the difference.
Mortgage Loans
Loans against farm lands, called
mortgage loans, are frequently made
In country districts, If Mr. Smith,
lacking an indorser or sufficient col.
lateral or business standing, owned
farm free Of debt he might give
mortgage on II as security
The procedure would be somewhat
different from leaning against mer
chandlse. The law, realizing the use.
full place farm and home owners oc.
I'm, pEotssettss then eEElaii,, I, nrspesslal .rsSsr
l9er. IT says to the lender, in case OF
default on a mortgage loan, "You
must give this owner Of land one
year after serving notitJ that you ex-
pect to sell his land to pay the
mortgage and redeem the debt" This
Is called the period of redemption.
Mr.. Smith has still another method
open TO obtain funds from his banker.
He has sold say, $500 bill OF mer'
chandise to Mr., Brown, dealer in q
smaller community, who must fell
the goods to his own customerYbe.
fore he can pay Smith. Smith says to
Brown. III you can't pay cash give
me a ninety day note. will discount
IL and get immediate cash on it from
my bank. will have to pay 6 per
cent interest to do so, and ! shall
want you to pay that interest" Mr.
Brown agrees and makes his ninety
day note for $500 with interest at {
per cent. mir. Smith takes this note
to the bank, which advances him
credit for $500, When the bank col
lects the note from Brown ninety
days later II receives S5O75O, the
added $3.50 being the per cent In
terest charge for the use meanwhile
Of the money for the ninety day pc
riod Of the note.
These are the various ways IN
which the bank serves its community
by placing, through loans, the accu
mulated thrift Of the community a
the disposal OF business and industry