The Challis messenger. (Challis, Idaho) 1912-current, 1923-10-03

some people think that to incur u
debt at the bank is unwise, or 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 which
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 Cs of credit
Character, Capacity and Capital.
Character is an imperative business
qualification. Allied with character
is Capacity. Before making a loan a
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
loan to make 1t safe.
Let us consider the business trans
actions of Mr.. Smith, the storekeep- |
er. He finds, with his business in
creasing, that he needs larger stock |
Of goods. Also, some of his custom
ers do not pay cash, and their acr
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 Mr..
Smith to submit 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,
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 receivable
and on trade acceptances. Mr.. I
Smith may be told by the banker /
hat, because he has sufficient money
n his business and manages 1t we'll, {
he bank will extend him credit with l
tut his putting up any security be- c
'ond his own word Of honor, evil s
enced by his note. t
Let US say that Mr.. Smith needs t
naximum amount Of $4,000 during f
is busiest season and that the bank n
as consented to grant him such II
line of credit" Mr.. Smith could n
ONE to the bank and make out a C
ote for any portion C. all of this v
mount for any time up to six months. E
o pay some bills he needs, say, d
500. He estimates that within sixty p
avs he will receive from his charge Il
ustomers enough money to repay c.
lis amount. He therefore makes a IL
ixty day note, which the banker d
discounts" at the prevailing rate Of a
lterest, let us say per cent, and tt
Iaces the proceeds to Mr. Smiths Of
edit. How much does he credit to ri
n Smiths account? SIX per cent
! $500 for sixty days Is S.. This W
mount the banker deducts at the b,
me the note is made, It being the m
terest which he charges Mr. Smith NJ
=
thence N. 10 degrees 50 minutes