The place of payment is usually stamped upon the face of the acceptance. Under the Negotiable Instruments Law, now uni form in all but five states, a trade acceptance payable at a designated bank is paid upon presentment at maturity at the bank, just as checks are, provided there are sufficient funds to the acceptor's account. The paid acceptances are returned to the acceptor as vouchers. Presentment of the items to the drawee for acceptance may be made through the bank or by the seller himself. The same may be done with its collection when due. If done through the bank the seller may either leave the accepted paper with his bank from date of acceptance to maturity, or may keep it himself until maturity or until he discounts it. The seller may discount his acceptances at his bank, at a discount company which specializes in such items, or through note-brokers. Exten sions of time are possible with acceptances, but there must be a definite understanding between the seller of the goods and the buyer to that effect at the time of accepting the original; if the buyer's credit is good and nothing has happened meanwhile to blemish his credit title, there is no reason why renewals could not be freely obtained.
The Acceptance Compared with Commercial Draft "Trade acceptance" is a new name formulated by the Federal Reserve Board in 1915, for the commercial time draft when used in certain ways. Commercial drafts may be drawn at sight or payable a certain time after sight, and the bill of lading may be attached, the title to the goods covered by the bill of lading re maining vested in the seller, the drawer of the draft, or party to whom the bill of lading is indorsed, until the draft is paid. For merly such commercial drafts, accompanied by bills of lading, had been used for the most part only when the seller of the goods did not trust the buyer; the result was that customers had come to resent the presentation of a draft with bill of lading attached as a reflection on their credit. Such drafts had also been fre quently used as a means of collection when collection letters had failed to produce payment, and customers likewise regarded these as reflections on their credit. By giving up the name " draft " and using "trade acceptance" it was hoped that the presentation of a bill drawn by seller on buyer would be rendered less offensive. The term "draft" continues to be used for sight exchange and finance bills, and the term "trade acceptance" is regarded as an acknowledgment of an obligation arising from a trade transaction and as a promise to pay it on a certain date.
Relative Value of Two-Name and Single-Name Paper The desirability of two-name paper as compared with single name paper is wholly relative and dependent upon circumstances. If the person who presents the note for discount is financially much stronger than the maker of the note, it is quite likely that the person's own unsecured note would be nearly as desirable as their two-name paper. If the maker and the presenter of the note should both be parties of small means, the combined responsibility represented in this kind of paper would be of little or no value, and therefore would not of itself make the paper satisfactory. The
ultimate test of the security of a note invariably lies in the respon sibility of those whose names appear on it, and if one of those names represents undoubted financial stability and moral in tegrity it is far more desirable to a bank than is paper with several names whose credit is limited or whose integrity is questionable.
As a general rule the responsibility upon which a loan is based is that of the maker. While there are instances in which it may be safe to rely to a certain extent upon the strength of the personal indorsement, it is not good banking to make a loan which is largely out of proportion to the responsibility of the maker. Although such a loan may be perfectly safe, as a rule the indorser's means are not of the character of assets which would make a promptly realizable. Partial reliance may often properly be placed on the indorser, the maker being a fair risk and the indorser sufficiently responsible to give added strength to the note. In judging the value of a personal indorsement, the essen tial point to be considered is the nature of the indorser's assets, whether they comprise slow or quick items, and whether he can be depended upon to pay promptly and without litigation in case the maker defaults at payment.
Two-name paper is regarded with more favor when it grows out of actual commercial transactions. In this respect the trade acceptance probably excels the promissory note with two names and surely the promissory note with one name, for the reason that it is by its very definition and terms based on a commercial transaction. Any paper which is a true commercial instrument springs from a commercial transaction, represents sales of merchandise actually made, payment for which is agreed to be made shortly in the defi nite future, and is self-liquidating since it represents a transaction which will provide funds within the period named for its liquidation.
Bank loans on single-name paper are presumably made to the signer until he receives cash for goods which he bought and paid for, but each note represents many such transactions. It may be "based on raw materials or merchandise not yet sold, which may be destroyed, affected by age, or never sold." When a banker loans on a single-name paper he is loaning on mixed security—on goods already sold and represented by accounts receivable and bills receivable, on goods in stock not yet sold, and on general assets. There is a mixing of commercial, personal, and invest ment credit. He does the same when he discounts notes receiv able or acceptances for a customer, for he carefully investigates and weighs the credit title of both names; but with this kind of paper he is surer that the paper arose from commercial transac tions and is self-liquidating.