The Challis messenger. (Challis, Idaho) 1912-current, 1923-10-10

~ACAANJ " SlCetL VI IAASpC ihtSN ~
Some people think that to incur o
debt at the bank is unwise, or a re-
Election on their business standing.
This is not the case where the debt
is contracted for legitimate business
purposes. Incurring debt to live be-
yond ones income is something no
thrifty person would do, and careless
use of credit leads to extravaganza
and disaster, but wise borrowing Is
an encouragement to thrift and in
dustry.
The first function OF the banker is
to encourage industry and thrift so
that a large fund Of bank deposits
may be accumulated. This fund is
often likened to a reservoir in whcih
water is accumulated for community
needs The banker then loans from
this fund to those conducting the
business of the community.
The banker bases credit on what
are known as the three C's Of credit
Character, Capacity and Capital
Character is an imperative business
qualification. Allied with character
is Capacity. Before 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 mans
worth in money, merchandise, stocks
and bonds or lands. which may be
given as collateral in security OF a
loan to make it safe.
Let us consider the business trans
actions of Mr.. Smith, the storekeep-
er. He finds, with his business in
creasing, that he needs a lager 1tock
of goods Also some of his custom
ers do not pay cash, and their &C
counts must be carried until pay
day." He must have more money for
his business. so he goes to his banker
for advice The banker asks MT
Smith to submit a statement Of his
business, showing what he owns and
what he owes. He knows Smiths
character and responsibility from his
observation Of his dealings and from |
the confidence that people have in |
him. If he finds Mr.. Smiths state |
ment, and the progress he Is making, |
satisfactory he will be glad to con- I
slider the best method Of loaning him /
the needed funds
How Money Is Loaned
Money is loaned by banks on (
straight notes, on Endorsed notes on
collateral notes, on bills receivable
and on trade acceptances. Mr.
Smith may be told by the banker
that, because he has sufficient money
in his business and manages It well,
the bank will extend him credit with
out his putting up any security be-
yond his own word of honor, evil
denced by his note.
Let us say that Mr.. Smith needs
maximum amount of $4,000 during
his busiest season and that the bank
has consented to grant him such a
Zine of credit" Mr.. Smith could
come to the bank and make out
note for any portion all Of this
amount for any time up to six months.
To paw some bills he needs. say,
$500. He estimates that within sixty
laws he will receive from his charge
customers enough money to repay
his amount He therefore makes a
sixty day note, which tle banker
discounts" at the prevailing rate Of
interest, let US say per cent, and
places the proceeds to Mr. Smiths {
,redit. How much does he credit to
Mr. Smiths account? Six per cent
N $500 for sixty days is So This Y
mount the banker deducts at the
ime the note is made, it being the I
interest which he charges Mr. Smith .