40 BULLETIN 558, U. S. DEPARTMENT OF AGRICULTURE. 
FINANCING THE BUSINESS. 
Few operators of country elevators have sufficient capital of their 
cwn to operate their business and must depend to a considerable 
extent on outside assistance, which is obtained from several sources, 
such as local banking institutions, farmers, and commission mer- 
chants. In some instances the larger concerns in the Western States 
obtain the necessary funds from eastern banks or through “ paper 
brokers,” in this way reducing the interest rate from 8 or 10 to 5 or 
6 per cent. The smaller dealers can not avail themselves of this 
practice, but in the eastern and southern portion of the grain belt 
there seems to be little difficulty in securing necessary funds from 
local bankers, although in some parts of the Southwest the rate of 
interest ranges from 8 to 12 per cent. 
Sometimes local banks are unwilling to furnish the necessary 
funds, either because they lack sufficient capital or because of the 
uncertainty of the moral hazard. In these cases the country dealer 
is usually able to obtain the necessary accommodation from grain 
commission firms located at central markets. These firms act in 
the capacity of buffers, securing the money from the banks in the 
large cities at a rate of 5 or 6 per cent and subloaning it to the 
country elevators at the same or a slightly higher rate. As compen- 
sation for their trouble they receive not only the small difference in 
the interest rate but also most of the borrower’s business. Fre- 
quently, one of the conditions under which the Joan is made provides 
that the borrower must consign a certain proportion of the grain he 
ships (varying from 50 to 90 per cent) to the lender. In a few 
cases farmer members are leaving returns from their grain with the 
cooperative companies or loaning them other money; in this way 
they receive 6 per cent interest on funds on which they would obtain 
only. 3 to 4 per cent at the local banks. But even with all these 
sources from which to draw needed funds, the country elevator 
operator at times finds himself unable to secure necessary capital, 
and either sustains large losses through inability to fill contracts or 
is compelled to sell his grain at a sacrifice in order to obtain money. 
FURNISHING BAGS TO FARMERS. 
In some sections dealers for many years have furnished the farmers 
with bags for their grain. Upon the approach of harvest the farmer 
may obtain the bags needed from a near-by dealer, whose hope of 
remuneration lies in the expectation of purchasing the farmer’s 
grain. Sometimes, however, the farmer disposes of his grain to a 
rival dealer and the bags are widely scattered over that section. 
Sometimes, also, the farmer uses as many bags as may be required for 
the grain held for his cwn use. Many bags are thus lost and dam- 
