When the capital has been acquired otherwise than by dint of personal exertion and continued saving there is not the same assurance that the funds will be judiciously handled, as is the case when the merchant has earned the money himself. The beginner in busi ness who finds himself in possession of capital before he has learned to take care of it, is in danger of losing his money thru ignorance and inexperience. "Acquir ing the needful experience and education should al, ways precede the employment of capital; but where the experience and education are undertaken to be gained concurrently with the use of capital, there is always danger that the latter will be lost before the former is gained." 21. Moral character in its relation to will be noticed that the two factors thus far consid ered, business ability and financial strength, have to do with the credit-seeker's ability to make payments according to terms of sale. His willingness to make such payments is .another matter and is equally im portant. Such willingness depends upon moral char acter. Where personal integrity is lacking, the creditor's capital, with which the debtor has been in trusted, is always in greater danger.
Here, however, we should distinguish between dif ferent degrees of culpability even tho the final out come may be the same in every case. Thus we have the dealer who deliberately plans to defraud his cred itors of their capital. He is a swindler pure and sim ple. Less pronounced, tho from the credit-giver's viewpoint perhaps even more dangerous, is the easy going, self-indulgent debtor thru whose laxity and disregard of moral obligations confiding creditors arc robbed of their capital. The mistake is frequently made of treating the latter class of delinquents as tho they were to be pitied rather than blamed. It is suffi cient to point out that no man is blameless who diverts to his own use funds belonging to another. Even tho such a dealer has no deliberate purpose to defraud his creditors, he is nevertheless unworthy of considera tion as proper credit risk. His business does not "owe him a living" unless he actually earns it. When this "living" has to come out of the creditors' capital, the boundaries of business integrity are clearly being overstepped.
22. The customer who makes unjust claims.—In addition to the dealer who seeks credit with a deliber ate intention to defraud, and the one whose laxity of business methods causes loss to his creditors, there are those who do not hesitate in other ways to take advantage of confiding creditors. They will cancel orders and return goods for trifling or for purely imag inary causes. They will, without justification, set up
claims for rebates and will deduct from their bills cash discounts long after the expiration of the dis count period. Thru pilfering of this sort the whole saler is deprived of profits that rightly belong to him, while his increased cost of doing business must be borne, in part at least, by those of his customers who deal fairly with him.
With decreasing profit margins, due to growing competition, the injustice of such practices is being felt more and more by wholesalers, and the protests against these evils are becoming louder and stronger year by year. Many credit-givers have taken a defin ite stand against them. The subject is discussed more fully elsewhere in this volume.
23. The good moral risk.—In studying the credit seeker's title to consideration on the ground of moral character, the wholesaler will of course inquire whether he possesses honesty, good personal habits, diligence in business, frugality and punctuality. Taken together, these determine the applicant's title to be considered a "good moral risk." No one element stands out as paramount among the various factors of which a credit title is composed. It has been said by some whose right to be heard on such a question cannot be denied, that character is the only thing to be considered in determining a credit risk. That a good character goes a long way in busi ness is not in question, but that it is sufficient in and by itself to secure present possession of goods or funds on promise of future payment may well be doubted. The bank when making a loan usually looks well into the nature of the collateral no matter how high the moral standing of the borrower. The same prac tice obtains in every properly conducted mercantile establishment; the Material assets of the credit-seeker come in for just as keen scrutiny as does his personal integrity—not infrequently they receive even greater consideration.
Moreover, whatever the financial strength and per sonal integrity of the credit-seeker, unless he also possess a certain amount of business ability he is not likely to be permanently successful. Hence, to say that character is the only thing to be considered in passing upon a credit risk is to ignore commonly ob served facts, unless indeed the term "character" be made broad enough to include such business ability as, when coupled with integrity, almost invariably in sures business success.
The existence of credit title is therefore generally determined upon the facts as they relate to these ques tions of character, capacity and capital.