80 CIRCULAR 10 0, U. S. DEPARTMENT OF AGRICULTURE 



on the faith and belief that the association would be able to pay 

 them out of the tobacco received. Approximately $500,000 was ob- 

 tained in this way in loans ranging from $1,000 to $50,000 each. 

 Many of the bankers throughout the tobacco territory were un- 

 willing to assist the association for fear of antagonizing the large 

 tobacco companies. Furthermore, in many of the smaller towns, 

 leaf dealers and warehousemen were financially interested in the 

 local banks and brought pressure to bear upon them not to assist 

 the association in any way. Many of the small country bankers, 

 however, were very sincere in their support of the cooperative move- 

 ment, and it was from these friendly bankers that the association 

 succeeded in raising the first $500,000. This amount was paid off 

 as soon as possible from the sales of green tobacco. 



In August, 1922, the association succeeded in borrowing $500,000 

 from a large bank in Pittsburgh, Pa., and $300,000 from a bank in 

 St. Louis, Mo. These loans were made for a period of 90 days. 

 The association had meanwhile demonstrated that loans on green 

 tobacco were reasonably safe and thereafter several substantial 

 short-time loans were obtained from large banking institutions in 

 other areas. These loans were sufficient to enable the association 

 to advance members 40 per cent of the value of the tobacco delivered 

 and to pay current expenses. So successfully had the financing of 

 the advances for green tobacco been conducted during the first year 

 that the association had no difficulty in subsequent years in obtain- 

 ing adequate loans. 



The large buying companies did not always pay immediately for 

 tobacco bought from the association. But money was always neces- 

 sary to meet the many obligations of the subsidiary warehousing 

 corporations and the payments to members. When a sale was made 

 to a tobacco buyer the letter of acceptance from such buyer was used 

 as collateral for negotiating further loans. These loans were retired 

 as soon as final settlement was made by the company. 



Green tobacco delivered to the association was used as security 

 for negotiating the loans with the different banks. The problem 

 of securing title to the tobacco from the time it came into the pos- 

 session of the association until it was sold or redried was a perplex- 

 ing matter. An agreement was finally made between the loaning 

 banks and the association whereby title to all green tobacco received 

 was transferred to the American Trust Co. of Richmond. Each 

 association warehouse was required to render daily a statement 

 showing the quantity and grade of tobacco delivered and the amount 

 of advances made thereon. These statements, supported by a list 

 of detailed receipts, were filed with the American Trust Co. and 

 held as security for the loans obtained. As loans were repaid out 

 of the proceeds of sales of green tobacco an equivalent amount of 

 this security was retired. The American Trust Co. made a charge 

 for this service of one-fifteenth of 1 per cent in addition to the cost 

 of the clerical labor involved. 



A large part of the tobacco received was redried and shipped to 

 bonded warehouses for storage. The finance committee of the asso- 

 ciation was able to complete an arrangement with the War Finance 

 Corporation whereby the corporation agreed to make loans to the 

 association practically without limit, but with the understanding 



