embarrassment. On the other hand, if you know your security is good, there is no reason why you should feel any degree of awe or nervousness in offering your own or your customer's notes. That is what the bank is in business for, and your proposition, if not made for purposes of reckless speculation, is welcomed in ordinary times.

Bear in mind, however, that your banker may, at times, have to refuse your paper, because he has seen clouds on the financial horizon of which the average person is ignorant, and he is endeavoring to protect, not only his stockholders, but his patrons, from the storms that are imminent. It is advisable for you to consider his views carefully, and probably to curtail business expansion.

Your average balance on the bank's books has a great deal to do with the amount of the loans, no matter how well secured, that you can ask reasonably.

Every bank has a number of customers who expect to be taken care of in the loan department. But, if all the bank's patrons are borrowers, it soon will have loaned out all of its funds. The bank must have depositors also. While some depositors do not ask for loans, experience has shown that the proportion of a customer's balance to his loans must be sustained in order to keep the bank adjusted. In New York the banks generally require a regular customer to keep an average balance of not less than twenty per cent. of the loans made him. Most interior banks consider ten per cent. about the right proportion. For example, in the interior cities, if your account shows an average balance of $200.00, you can reasonably request loans, properly secured, of $2,000.00. An average balance of $1,000.00 should entitle the depositor to loans of $10,000.00 and so on. Experience proves that if the banker does not keep this important point in mind, his machinery will be "out of gear."

Speaking generally, it will pay any concern to borrow money, if necessary, to show a fair balance to its credit. Bankers are only human, and all business is selfish. Every bank will be disposed to take care of its best paying customers first in times of financial storms. Every merchant looks out for his best customers first. Why not a banker? When a firm attempts to hold its bank down to the last cent of profit, keeps no balance to speak of, and subjects the bank to endless expense in the collection of its checks and drafts, it can not reasonably expect as liberal treatment in "squally times" as the concern which pursues the broader policy of "live and let live."

Some firms, if they would figure it out, could see plainly that the bank was handling their account at a loss; yet, they think they are conferring a great favor in placing their business with any bank.

A large concern was pursuing this narrow policy. Among other things it made a practice of borrowing large sums in other cities at four or five per cent. when the local rate was six. The recent panic came on. Money advanced to fifty, to one hundred per cent. in New York. The local banks were having all they could do to take care of their own good customers. The result was that this firm came to the verge of an assignment. And, if it had not happened that the banks of its city did generously come to its rescue, it would have collapsed.

It is well to remember, that, while the rates of interest in New York are temptingly low at times, they fluctuate violently and often without warning; also that the bankers in a strange city have no personal interest or local pride in your success or failure.

Money is only a commodity, and rates of interest are governed by supply and demand. Now the supply of money in the New York banks varies tremendously, by millions of dollars in fact. This variation comes from many causes. On the other hand, the demand for money in New York is constantly changing. The reasons for this are manifold. But in the smaller cities, both the supply and demand are much more uniform and steady. Hence the rates of interest, outside of New York, are much less liable to change. Therefore, unless the demands of your business exceed the banking facilities of your town, it is very advisable for you to confine your loans to the local banks.

The loan department is restricted by certain laws, just as the other departments. State and Savings Banks, and Trust Companies must obey the laws of their particular State, but any bank having the word "National" as part of its name, or the letters "N. A." (National Association), or the letters "N. B. A." (National Banking Association) following its name, must adhere strictly to the provisions of the National Bank Act. The Congress of the United States has forbidden the use of the word "National" as part of the name of any Bank or Trust Company which does not comply with all of the sections of the National Bank Act.

As the statutes differ in each of the separate States, only the laws governing National Banks will be considered here.

The whole spirit of the National Bank Act in relation to loans is to prevent the advancing of money on anything but "quick assets." In other words, loans must not be made on any security, that can not be turned into money quickly. For this reason a National Bank can not lend on real estate as a security. Also it should not accept notes having longer than ninety days or four months to run. The fundamental principle of the law is the guarding of the depositors' money; to have it ready for them at all times. But the whole fabric and theory of banking is founded on the fact, demonstrated by centuries of experience, that at no one time do all the depositors want to draw all their money from all the banks. Also that every day some loans are due and can be converted into cash if necessary.

Payment of demand, or "call," loans can be demanded any day. On time loans, payment can not be asked for until the maturity of the note, the day agreed upon by the bank and the borrower.

On demand, or "call," loans the interest must be paid at the end of every three months, or when the loan is paid. On time loans, the interest, or discount, is paid in advance.

Notes reading one, two, three, or four months after date are due, of course, one, two, three or four months after the date of the notes. But thirty, sixty, or ninety-day paper is not due in one, two, or three months. This is a common error. The exact number of days must be calculated. The following table for determining the maturity, or "due date," of thirty, sixty, or ninety-day paper is herewith given:

TABLE FOR FINDING MATURITY OF NOTES AND DRAFTS

At 30, 60, and 90 Days