Evening star., 1942-03-01
|ndustryNeeds1
Cash 10 Handle.
Arms Orders
Thousands of Small
Firms Lack Funds
For War Effort
BY FRANK MacMILLEN,

WtQe WOIld DubAucb5 WLlbtTs Nv
NEW YORK, Feb. 2s.-where cxn
I get the money to finance q de-
fense contract? r
This Is q problem bedeviling tho6-
sands Of small manufacturers and
contractors as they struggle to get-s
share Of the country's war business!
Nearly all small companies and
some big ones doing defense work
are pressed for cash. AS a rule
contractor must wait for payment
until 80 days after delivery Of the
finished order. =
Meanwhile he must dip into his
own pocket for raw materials, pay
rolls and new machinery. =
Big income taxes which must Be
met in cash are another drain on
company funds.
1t isn't very difficult for most big
companies. The banks are ready TO
take care of their requirements.
Chrysler Corp. this week completed
arrangements for a $100, 900 900 line
of credit with its various banking
connections.
Many Hard Pressed.
Many little fellows, however, are
having q hard time. Lack Of funds,
in fact, has become one Of the big
gest stumbling blocks in the way
Of getting small manufacturers into
the war effort. Many observers close
to the situation feel that unless
some new machinery for financing
contracts is developed 1t will be i'm
possible to realize a complete all
out effort.
A typical problem, described by q
banking expert here, Is that OF q
manufacturer who does an annual
volume of business Of about s25 900.
There have been many cases where
a firm of this size has obtained .
defense contract for 100000.
A company of this type just
doesn't have the cash to buy raw
materials, machinery and pay work
ers on a job of this size. Until it
can get loan, it is powerless to 60
ahead.
1t is in this type of case, many
feel, that the banks have fallen
down on the job of financing de-
fense. Conservative bankers say the
country's financial institutions
haven't turned down single de-
fense loan unless the contractor was
known to be dishonest or incompe-
tent.
Regarded as Too Risky.
However, many industrial men In
a position to observe think too many
little companies have been refused
credit for it to be merely a matter
of incompetence and dishonesty.
Men familiar with the problems Of
financing these contracts say that
banks feel many of these loans are
Just too risky and don't wish to
handle them.
You don't have to look far in in
dustry today to find many execu-
tives. who believe that banks still
are shell shocked from the terrific
losses of the 1882 depression. They
say banks are leaning over back
ward to do business the safe and
easy way, letting anything with an
appreciable amount of risk IN 1t 60
by the boards.
For example, an authority here
cited several banks which refused
| to loan money to a defense con-
tractor even after the goods he
manufactured had been inspected
and accepted by the Army and he
was merely awaiting payment. They
maintained it was against their pol
icy to lend money against receiv.
ables.
Some Roll Up Sleeves.
Some banks are rolling up their
sleeves and taking on plenty Of
risks that may later be headaches.
Some experts working on prob
lens Of financing defense contracts
believe that some new form of credit
must be worked out to fill the needs
of small firms with poor credit
ratings. One suggestion Is that
the Government set up a defense
loan corporation to guarantee q
certain portion Of the losses on
loans for defense purposes.
For example, the corporation
might guarantee losses up to 10 or
20 per cent in return for portion
of the interest received. This would
parallel the function Of the Gov
ernment's Federal Housing Au-
thority in the home mortgage field.
The charge for loan Insurance.
might be q of l per cent out Of
4 or 5 per cent interest charge, 1t
was suggested.
1t Is possible the Government
might take substantial losses on
this, but many observers believe
such a policy would aid more than
any other single factor in speeding
the spread of defense work TO little
manufacturers,