220 THE FARMER AS A COOPERATOR. 



soon as it can be delivered to the warehouse. As it will not 

 be immediately sold, the corporation must borrow money to 

 make the advance. It will be found difficult, however, to give 

 the necessary security. It is inconvenient, and in fact usually 

 impossible, to pledge the product, as it is ordinarily graded 

 and inseparably mixed with other products, upon which, 

 perhaps, no advance is desired, and at any rate as the material 

 is constantly coming in and going out, it is exceedingly incon- 

 venient to be constantly executing pledges, and obtaining 

 releases from day to day as it moves. It is desirable, there- 

 fore, to obtain these necessary loans upon the general credit of 

 the corporation, which is itself fully secured, as it holds posses- 

 sion of the product upon which the advance is made. If, 

 however, application is made to the local bank, it is probable 

 that any loan to the corporation will be refused. 



The reason of this is apparent. It has already been shown 

 that a corporation is safer for the individual stockholder than 

 an unincorporated society; but by as much as it is safer to 

 the stockholder, by so much is it rendered unsafe to a creditor 

 of the corporation; a bank, therefore, will often refuse a loan 

 to a corporation which it would gladly make on the joint note 

 of a small number of its stockholders. It is easy to see the 

 reason of this; of course notes executed to banks in the ordi- 

 nary transaction of legitimate mercantile business are usually 

 paid at maturity.; but sometimes they are not, and prudent 

 bank officers, in making loans, must invariably consider what 

 would happen should they be forced to collect the note by 

 law ; if, therefore, a loan to a corporation were contemplated, 

 the matter would be referred to the attorney of the bank, who 

 would proceed to inquire as follows: — 



1. Is the society legally incorporated? 



2. Are its present directors legally chosen? 



3. Have they, under the articles of incorporation ana the 

 by-laws, the authority to authorize the proposed loan? 



4. Have they so authorized it? 



5. What officers are authorized to sign the note? 



6. What other indebtedness, if any, is outstanding again.st 

 the corporation? 



