PROBLEMS OF COOPERATIVE MARKETING ASSOCIATIONS 29 



as the financial point of view, therefore, it is desirable that the mem- 

 bers should assume as quickly as possible the full burden of financing 

 their association. 



OPEEATING CAPITAL 



In addition to funds required for permanent investments, an as- 

 sociation must have a greater or less amount of operating capital. 

 Operating capital is necessary to purchase packing supplies, pay the 

 wages of labor employed in harvesting, packing, and other opera- 

 tions, make advances to members, and for similar purposes. Many 

 associations are severely handicapped by lack of operating capital. 



Associations that have been in business for some time frequently 

 accumulate a reserve that provides at least a part of the operating 

 capital necessary. It is more generally the custom to borrow all or 

 a part of this sum. A newly organized association, of course, has 

 no reserve on which to draw. Such an organization may procure 

 operating capital (1) in part from the sale of stock, or from mem- 

 bership fees, (2) by unsecured, or partially secured loans from its 

 members or others, (3) by loans secured by members' collateral 

 notes, (4) by loans secured by personal indorsement of officers or 

 directors, (5) by loans secured by warehouse receipts, (6) by loans 

 secured by a draft on a purchaser of the association's products, and 

 a bill of lading, or " car delivery order," for the shipment covered 

 by the draft. 



The use of members' collateral, or accommodation notes has al- 

 ready been discussed. They can be more properly used as collateral 

 for temporary loans than for the purpose of procuring loans to be 

 used for permanent investments. The indorsement of the associa- 

 tion's notes by a few financially responsible directors has the objec- 

 tions already mentioned. 



Warehouse receipts may be used for certain nonperLshable, or 

 semiperishable products, 7 while with certain perishable products 

 advances procured by drafts covering car-lot shipments may take 

 care of the larger part of the operating capital necessary. 



It is advisable that some provision be made for a permanent 

 operating capital fund, or that the association be given the financial 

 standing to enable it to borrow the amount necessary on its un- 

 secured note, or with such security as is readily available. 



RESERVES 



It is necessary that associations should have adequate reserve 

 funds to provide for losses that may occur, to provide at least a 

 part of the operating capital, to give the organization a sound 

 financial standing, and to make temporary advances to members 

 for production or marketing purposes, where such advances are 

 necessary. 



MARKETING CREDIT 



Usually, the members of fruit and vegetable associations do not 

 receive payment until the products they have delivered are sold 

 and the pools closed. When a pool extends over a long period, 



7 Service and Regulatory Announcements No. 61, Information concerning the United 

 States warehouse act, 1920. 



