12 



BULLETIN 394^ TJ. S. DEPARTMENT OF AGEICULTUEE. 



CREDIT. 



Practically all of the stores required, at times, more capital than 

 was provided by the sale of capital stock and accumulated surplus. 

 The interest paid averaged 7 per cent, which can not be regarded as 

 excessive (see Table III), As in the case of any other business, the 

 ease with which a store is able to borrow depends upon its commercial 

 rating. When a store is successful and has a high rating, it can secure 

 all the capital it needs upon the note of the association. For many 

 struggling stores, however, the only way in which credit could be 

 obtained was by having those who were most interested indorse a 

 bankable note in favor of the association. In many cases, especially 

 where the borrowing has been done to bolster up a poorly managed 

 and failing business, the practice of indorsing the notes of the as- 

 sociation has been responsible for serious losses to members. 



Table III. — Practice as to credit. 



Question. 



Number 

 report- 

 ing. 



Low. 



High. 



Average. 



Yes. 



No. 











40 





Rate of interest 



37 



6 p. Ct. 



10 p. ct. 



7 p. ct. 









Is credit difficTilt to obtain . . . . j 



6 

 16 



18 



33 



Security required 









26 



Are bills discounted regularly 









15 



Tf.stiTnntfid nnniial disnnnrit 



24 



S150 



S6,949 



$997 





Credit extended to customers 



45 



2 



Losses due to credits . 



15 



S25 



$4,231 



8664 





Accounts paid promptly 



25 



5 













It was found that some stores systematically used their credit at 

 the bank in order to discount their bills, saving a profit to the store 

 by tliis method. That this is not common, however, is indicated by 

 the fact that only 18 stores reported the uniform practice of taking 

 advantage of discount, while 16 never discounted their bills. Among 

 those reporting the practice of discounting their bills, the saving 

 ranged from a minimum of $150 to a maximum of $7,000 a year, 

 with an average of $1,673 for the 18 stores taking regular discounts. 

 The figures indicate that not enough attention is given to this 

 source of profit. It was found that among the most successful 

 stores following the practice, the cash discount paid a considerable 

 proportion of the operating expense. In addition to the saving 

 effected, the practice of taking discoim.ts has an important effect 

 upon the wholesale houses and the buying efficiency of the store. 



Of 50 stores, only 2 were f omid to be doing a strictly cash business. 

 Most of the managers claimed that the extension of credit to cus- 

 tomers was absolutely necessary. The time for which credit was 

 allowed varied from 1 to 6 months, the average credit period given. 

 for 27 stores being 2 months. 



