12 
BULLETIN 394, TJ.' S. DEPARTMENT OF AGRICULTURE. 
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. 
Do you borrow monev 
40 
..„. 
16 
18 
7 
37 
Gp.ct.^ 
10 p. ct. 
7 p. ct. 
33 
26 
15 
24 
$150 
$6,949 
$997 
45 
2 
15 
$25 
$4,231 
$664 
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 this 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 15 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 discounts has an important effect 
upon the wholesale houses and the buying efficiency of the store. 
Of 50 stores, only 2 were found 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. 
