2. Customer's credit the retail mer chant may he willing enough to extend credit, he has not usually, as we know, the same ready access to information about his credit-customers' financial con dition, character and ability as the wholesaler has with regard to his. The wholesale merchant has re course to the usual Dun or Bradstreet rating books, to financial statements and to credit reports. He can ascertain without any great difficulty whether or not his debtor is likely to pay for what he buys. The retailer has rarely any such sources of information to draw upon, altho of late years certain agencies have undertaken to furnish merchants with guides to the credit-standing and reliability of private individuals whose paying habits are known. Again, the retail merchant usually complies, as a matter of course, with the wholesaler's or the manufacturer's request for information about his property and his activities, whereas the retail merchant's customer is prone to regard such a request as little less than an impertin ence.
At the same time, the retailer is approached by an unquestionably larger number of dishonest credit seekers than the wholesaler. Every retailer has had experience with the professional "dead beat" who never pays for anything he buys unless actually com pelled to do so. Moreover even among those whose integrity is unquestioned, the element of stability is often lacking. They are here today and may be else where tomorrow; they may be employed this week and be without employment the next. Accordingly, the matter of directing the credits of a retail store especially of those stores that deal in goods of every day consumption—is not always an easy task.
3. Two important estimates.—The retail dealer should determine as accurately as possible, first, what portion of his capital he can afford to have tied up in outstanding accounts; and second, how much credit may with safety be extended on each account. The former is necessarily determined by the amount of capital invested in relation to the pe riodical volume of sales; the latter, by taking into con sideration the customer's financial strength and his reputation for promptness in paying his debts.
While that proportion of his capital which a mer chant may with safety invest in outstanding accounts necessarily varies with the nature of his business, with local conditions, etc., such proportion is invariably too large if it prevents the merchant from paying his merchandise bills and other legitimate expenses when they arc due. This is, in fact, the sole test.
Similarly, the test as to whether or not a retail customer has been given too much credit lies in the degree of promptness with which he pays his bills.
Where these matters are conservatively estimated and the estimate is faithfully followed, there is little , danger that difficulties will arise. Where credit is extended, however, without regard to these factors, it is generally only a question of time when the mer chant will find himself unable to meet his own credit obligations and when, as a result, he will be in danger of having bankruptcy proceedings instituted against him, or of being exposed to such other measures as his creditors may take to deprive him of the control of his business.
4. Discrimination in credit-granting.—If the credit seeker is one who possesses means, even tho he lack present command of them, he is ordinarily entitled to credit at the hands of the merchant. Cases of this kind differ little from those we have considered in our discussion of the wholesaler's credit practice. No country merchant hesitates to extend credit to his farmer-neighbor whose growing crops, tho still un harvested, give abundant assurance of their owner's ability to pay his bills in due time. In the same class may be put the salaried person whose regular income is sufficient for his wants, and who liveS well within his means. Especially is this true if he is the head of a family and as such permanently located in the com munity. An unmarried man is regarded by the re tailer with less favor as a credit risk. The same is true also of a married woman not legally responsible for her obligations.
The intemperate, the gambler, the manifestly in competent, the shiftless and the idler are necessarily unworthy of credit favors, and should be made to pay cash for their , purchases. Persons suffering from an apparently incurable disease are also regarded in eligible as credit customers unless, of course, they possess sufficient means to assure the payment of their account even in case of their death.
A good rule that may be followed with perfect propriety in extending credit to "charge customers" is to put the burden of proof upon the credit-seeker. It is perfectly reasonable to assume that a person who desires to obtain a merchant's goods in exchange for a promise of future payment should be willing to state on what grounds he bases his expectation of being able to make the payment at the designated time. This is the principle upon which commercial credit is today asked and given. It should obtain equally where personal credit is sought.