8 BULLETIN 541, U. S. DEPARTMENT OF AGRICULTURE. 



are not necessary in the case of organizations which arc in a position 

 to secure funds needed for short periods from other sources. 



Whenever an organization borrows, provision must be made for 

 paving interest and principal. In the case of short-time loans 

 required to finance the organization during the marketing season, 

 payment may be made from commissions deducted from the 

 proceeds of sales of the products. Thus, in some lines of business 

 considerable money is required during the rush season in order to 

 make advances to the farmers for their products, as the association 

 does not get the returns from the sale of the products until later. An 

 organization operating on a safe margin should not experience any 

 difficulty in meeting such obligations. 



Similarly when loans are obtained to finance the erection of build- 

 ings, or the purchase of property, provisions for repayment should be 

 made. Needs of this kind, however, can best be met in ways entirely 

 different from those employed in supplying money for short periods. 

 A method of obtaining money for such permanent purposes not 

 infrequently followed by cooperative associations is to levy assess- 

 ments on the members in proportion to the business done for them by 

 the organization. Thus, in the case of a creamery organization, 

 which borrowed the money necessary for building and equipping the 

 plant, a special levy of 1 cent for each pound of butter fat handled 

 was made in order to provide the money needed to repay the loan. 



In case of a cooperative organization which secures from its own 

 members the funds for making permanent improvements, it is some- 

 times argued that it is unnecessary to provide for repayment. There 

 are strong reasons, however, for the association specifically to assume 

 an obligation to return every contribution of this character. The 

 membership of an association will gradually change, so that an 

 organization which secured its capital from its original members, 

 sometimes finds that many of the old members have dropped out and 

 that new members, who have not contributed to the original expense 

 of the association, have come in to take their places. On this account, 

 unless some provision is made for the repayment of money obtained 

 from the members, the time may come when all the members who 

 have contributed will have withdrawn. Adequate provision, of 

 course, should be made annually for depreciation in the value of the 

 property. 



Loans may be secured from members with the understanding that 

 they will be repaid upon withdrawal from the association, or that they 

 will be repaid at some stated time, or in installments. 



One objection to allowing such loans to run until a member with- 

 draws from the organization, is that there may be a number of with- 

 drawals during one year and none during another year. Under these 

 circumstances it is difficult to forecast how much money will be 



