It is necessary that the credit-giver be able to dis criminate between legitimate, conservative enterprise on the one hand, and unreasoning optimism on the other.
8. Advertising.—At first sight it may appear a little fanciful to include advertising among the fac tors that determine a credit risk. Yet insufficient or wrongly placed advertising may seriously limit the sale of a season's output, just as wasteful and indiscrim inate advertising may add so large a burden to the cost of marketing the product as on that account to cut down profits to a dangerous point. Too much or too little advertising, its quality and the mediums selected for it—all are items of importance to the in telligent credit-giver and demand careful considera tion in the determination of credit title.
9. location of a retailer's store is an important factor in the success of his enterprise. The dealer is confronted with the necessity of bal ancing desirability of location with the cost of rents. Error may. easily be made in either direction, and the `vitality of the business may thereby be unduly taxed. Again, a change of location after a business has become established may, or may not, be advan tageous. Conservative retail merchants generally prefer not to move, as it is rarely possible to take along more than a small part of the trade built up at the old location. In cases where the character of the old neighborhood has altered, changes of loca tion have, at times, been the means of turning a small and unprofitable business into a large and prosperous one.
The manufacturer scarcely less than the retailer is affected by the question of location. His freight expenses depend on the distance to the market; the absence of railroad sidings means larger drayage charges both to and from the plant; even the quality of labor obtainable is often influenced by the access ibility of the factory—all of which, since they affect the success and permanence of the business, are mat ters that demand thoughtful consideration from a credit viewpoint.
10. Age.—In determining a; credit-seeker's busi ness ability it is necessary to consider his age. A too youthful merchant frequently lacks the stability and perseverance necessary to success in business. He may have started out enthusiastically, yet after a few months' experience he may begin to doubt the wisdom of remaining in business. He may conclude that he
would like to try something else or go somewhere else, rather than fight out the battle he sees before him.
Immaturity of judgment exposes the youthful mer chant to certain errors less likely to occur in the case of his more seasoned and experienced competitor. In clination to overbuying, too great optimism with re gard to collections—in short, all the dangers grow ing out of lack of experience and business ability are present in his case.
On the other hand, youth is aggressive and ambi tious. It readily adapts itself to modern methods, and is willing, as a rule, to be taught. This cannot always be said of the man of advanced age. In his case, tho we shall necessarily expect to find more ma ture judgment and greater fixedness of purpose, we may also find that only with difficulty does he adapt himself to newer merchandising methods. He is likely to insist upon doing things in the old way, even tho that way be obsolete and out of tune with the spirit of the present day. In competition with merchants of more progressive ideas, such a merchant usually fares ill. Moreover, the struggle and conflict that to some extent are always present in commercial life are not usually relished by him; hence that aggres siveness which our competitive system demands in a successful merchant is likely to be lacking in the mer chant of advanced age.
There are of course no fixed points beyond which on either side a credit applicant is too young or too old, but in estimating his business ability as a basis of credit the credit-giver should take into considera tion the applicant's age.
11. Evidence of financial ability.—Usually, but not invariably, a fair measure of financial ability goes with pronounced technical ability. A dealer may have a mind that runs to analysis and to a study of details; he may understand how to attract and hold trade, yet for all that be an indifferent financier. No business can be very successful unless its manage ment possesses good financial ability. A retailer must be able to regulate his finances so that he always has funds on hand with which to meet his merchandise bills as these fall due. To that end he must be a good collector, and must also maintain a certain definite relation between sales and outstandings.