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

Bankers Association
1g discussion of how and why
these MISUNDERSTANDING:
the proceeds OF the note, or $495.
When the note is due in sixty days
Mr.. Smith has received payment
from his customers. and he pays
the bank $500. The bank marks
the note paid and returns it to Mr..
Smith.
If Mr.. Smiths business condition
were not sufficiently strong to war
rant granting him unsecured credit
the banker might say to Mr.. Smith,
II want to help you, but you will
have to get the Endorsement Of
your friend, Mr.. Jones'" Jones il
known to the banker as very
reliable and responsible business
man. Should he be willing to help
Mr.. Smith he will write his name
on the back Of Mr.. Smiths note
and IL Smith cannot pay the note
when due Mr.. Jones will have to
pay.
In another case. the banker. still
anxious to help Smith, might say,
II am willing to loan you up to
$4,000, but you must secure the
loan with the goods which you pur-
chase for that amount and with
some additional goods" Mr.. Smith
would have to warehouse the mer-
chandise used as collateral in such
way that it might be easily
identified through warehouse re-.
ceipts as being the banks property
until the note is paid. II Smith
finally found himself unable to pay,
the banker could sell the mercllan.
disc 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. II Mr..
Smith, lacking an indorser or SUI
ficient collateral or business stand.
ing, owned q farm free Of debt he
might give q mortgage on 1t as
security.
The procedure would be some
what different from loaning against
merchandise. The law, realizing
the useful place farm and home
owners occupy, protects them in a
special manner. 1t says to the
lender, in case of default on a
mortgage loan. "You must give this
owner of land one year after serv-
ing notice that you expect 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, a
$500 bill of merchandise to Mr..
Brown. q dealer in q smaller com.
munity. who must sell the goods to
his own customers before he can
pay Smith. Smith says to Brown:
II. you can't pay cash give me q
ninety day note. I will discount II
and get immediate cash on 1t from
my bank. l will have to pay 6 pei
cent interest to do 80, and shall
want you to pay that interest" Mr.
Brown agrees and makes his
ninety day note for $500 with inter
est at s per cent. Mr.. Smith takes
this note to the bank, which. ad
vances him credit for $500. When
the bank collects the note from
Brown ninety days later 1t receives
s5O750. the added $3.50 being the
6 per cent interest charge for the
use meanwhile Of the money TO,
the ninety day period OF the note.
/ These are the various ways In
which the bank serves it, com
! munity by placing. through loans
the accumulated thrift Of the com
munity at the disposal Of business
and industry.