Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1923-06-07

work Tor them to increase tn
, on Public Education Of the 1
has undertaken in the followi
banks loan money to clear up
Some people think that to incur
. debt at the bank 10 unwise. or Q
reflection on their business stand
Ing. This II not the case whore
the debt 10 contracted for Iegitf
mate business purposes. Incurring
debt to live beyond ones income 10
something no thrifty person would
do. and careless use Of credit leads
to extravaganza and disaster. but
wise borrowing IL IN encourage
ment to thrift and industry.
The first function Of the banker
is to encourage industry and thrift
20 that . large fund Of bank de.
posts may be accumulated. This
fund Is often Nkened to . reservoir
In which water 10 accumulated for
community needs. The banker then
loans from this fund to those con.
Quoting the business Of the COM
muuity.
il The banker bases credit on what
are known as the three c. Of
credit - Character, Capacity and
Capital Character Is an impera-
tive business qualification. Allied
with character 10 Capacity. Be.
fore making . loan . banker takes
into consideration the capacity Of
the applicant-that IL. his ability
to earn through his honesty and his
industry. Capital is q mans worth
in money. merchandise. stocks and
bonds or lands, which may be given
- collateral in security Of . loan
to make 1t safe.
Let Us consider the business
transactions Of Mr.. Smith, the
storekeeper He finds. with his
business increasing. that he needs
. larger stock Of goods. Also. some
OF his customers do not pay cash.
and their accounts must be carried
until "pay day" He must have
more money for his business. 50 he
goes to his banker for advice. The
banker asks Mr.. Smith to submit
. statement Of his business. show
Ing what he owns and what he
owes. He knows Smiths character
and responsibility from his observ.
alton Of his dealings and from the
confidence that people have in him.
II he finds Mr.. Smiths statement.
and the progress he is making.
satisfactory he will be glad to con.
slider the best method Of loaning
him the needed funds.
How Money 10 Loaned
Money is loaned by banks on
straight notes. on Endorsed notes,
on collateral notes, on bills receiv.
able and on trade acceptances. Mr..
Smith may be told by the banker
that, because he has sufficient
money in his business and manages
1t well. the bank will extend him
credit without his putting. up any
security beyond his own word Of
honor, evidenced by his note.
Let us say that Mr.. Smith needs
q maximum amount of $4,000 during
his busiest season and that the
bank has consented to grant him
such q ''line Of credit" Mr.. Smith
could come to the bank and make
out note for any portion or all Of
this amount for any time up to six
months. To pay some bills he
needs. say. $500. He estimates that
within sixty days he will receive
from his charge customers enough
money to repay this amount He
therefore makes q sixty day note,
which the banker discounts" at
the prevailing rate Of interest, let
rs say per cent, and places the
proceeds to Mr.. Smiths credit.
How much does he credit to Mr..
Smiths account? Six per cent on
$500 for sixty days 10 IS. This
amount the banker deducts ut the
time the note 10 made, II being
the interest which no charges Mr..
Smith for the use Of the money.