Financing a Cooperative Organization 81 



the members, and on other financial transactions, and 

 in this way increase the stock dividends, the reserve ac- 

 count, and the amount prorated to the members. 



DIFFICULTIES IN FINANCING 



In a section where the cooperative plan is not an es- 

 tablished method of conducting business, it is sometimes 

 difficult to finance a new cooperative organization. Ex- 

 cept in a few sections, the cooperative method is new to 

 the banker. The organizations are often formed by irre- 

 sponsible or inexperienced farmers who do not inspire 

 business confidence, and who are not entitled to liberal 

 credit consideration. They are often attacked by their 

 competitors, who may influence the banks in which they 

 are interested not to extend credit. Under these condi- 

 tions, the banks naturally pursue a conservative course, 

 corporation notes are not always acceptable as security 

 for loans, and the responsible directors of the associations 

 may be required to give personal notes as additional 

 security. As soon as the cooperative plan is successfully 

 established, the banks and other business institutions rec- 

 ognize that the method adds stability to agricultural 

 credit. The personal notes of the directors are then no 

 longer required for security, and the corporation note 

 takes its own place as the most common form of associa- 

 tion credit security. Another serious credit difficulty 

 that the cooperative association often meets is the in- 

 ability of the banks to loan more than a certain proportion 

 of their capital stock to any one corporation. In Colorado, 

 where the limit is 10 per cent, the associations often have 



