Excerpt from How to Finance a Business: Where and How to Get Funds How to Use the Bank Partnerships and Stock Issues Success From Small Capital Financing in a Crisis Handling Investments Money Leaks and Savings Planning to Make Ends Meet
Hand to mouth financing recently caused the failure of a large department store in a city of the middle west. The store was well located and the capital should have been sufficient. At the start there was little competition and the business prospered.
The prosperity, however, was brief. The owner of the store concentrated his attention on selling and buying. He ignored credit. He paid all small bills upon their presentation at the cashier"s window, larger bills upon receipt of invoice. He took no measures to keep idle funds active; he did not try to establish a reputation among bankers and moneyed men; he adopted no plan to equalize his supply of capital with demand. At length the business required a new building. The younger members of the firm advised establishing their credit and borrowing the money they needed. A new competitor had entered the field and was making extensive improvements. One of the merchant"s sons, exasperated by this move, spoke to his father.
"See here," he said. "We"re behind time. Take the railways, the sky-scrapers - all the great industrial works for that matter.
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