The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1923-06-06

y
fail to understand the ways in
work for them to increase tn
on Public Education of the 4
has undertaken in the folloWil
banks loan money to clear up
Some people think that to incur
a debt at the bank Is unwise, or a
reflection on their business stand
ing. This is not the case where
the debt is contracted for legiti-
mate business purposes. mourning
debt to live beyond ones income is
something no thrifty person would
do. and careless use Of credit leads
to extravaganza and disaster, but
wise borrowing is an encourage
ment to thrift and industry.
The first function OF the banker
Is to encourage industry and thrift.
so that large fund OF bank de-
posits may be accumulated. This
fund is often likened to a reservoir
in which water is accumulated for
community needs. The banker then
loans from this fund to those con-
Quoting the business Of the COM
munity.
The banker bases credit on what
are known as the three C's OF
credit - Character, Capacity and
Capital. Character is an impera-
tive business qualification. Allied
with character Is Capacity. Be-
fore making a loan banker takes
into consideration the capacity Of
the applicant-that is, his ability
to earn through his honesty and his
industry. Capital is a mans worth
in money, merchandise, stocks and
bonds or lands. which may be given
as collateral in security Of a 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,
anu CACl4 ctSSOuAlo LAuSl 10 Nol leu
until pay day." He must have
more money for his business, so he
goes to his banker for advice. The
banker asks Mr.. Smith to submit
a 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 we'll. 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
maximum amount of e. 500 during
his busiest season and that the
bank has consented to grant him
such Zine 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 sixty day note,
which the banker discounts" at
the prevailing rate Of interest. let
us say 8 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 is S.. This
amount the banker deducts at the
time the note Is made. It being
the interest which he charges Mr.
Smith for the use OF the money
He then credits Mr.. Smith with