Native Banks before extending credit to a commercial concern generally make antecedent investiga-fons on the following lines:—Whether the applicant possess good business rating among his, profession.
Whether his management and organization are scund and ft.
Whether his payment has been prompt, (Whether he wants money: to facilitate speculation.
Whether he demands loan to pay for his previous business losses, Whether he is extending beyond the capacity of his capital.
All above points have to be investigated with great discretion.
The method of native banking is the procuring of a proper knowledge of credit, and.the acquiring of such knowledge in Shanghai is done through two kinds of method. The direct method, by which 2 com. mercial firm sends a report of its balance sheet together with any change of the owners in the firm is a common practice. This is, how-not considered by native banks. to be reliable and, accurate. They employ in majority. cases the indirect. method -by sending. out. their outdoor staff to ascertain specifically what the financial condition borrower is, what his business hi are, and what his record is for financial integrity. Credit men, who are literary speaking "watch dogs" in a truer sense, visit their clients almost daily to observe what they are doing. Sometimes other firms of same line of business are also approached for further information.
Credit investigation in Shanghai at present is a much more difficult task than in older times. Twenty, years ago it was an easy matter to Jobtain continuous information on the credit of any who may ask it. The reason was that the people in the same community at that time chang.
comparatively very little than nowadays. The same business was carried on from one generation another, and the result was that native banks had a continuous knowledge of the: antecedents of those engaged in the business. It is quite diferent to-day, because of the ever: increasing volume of trade on a great many new lines and ever-changing business occupations which cause antecedent Knowledge to become useless in the majority of eases. On account of such changing conditions, there has been a tendency rapidly growing among native banks to restrict loans on solely credit basis and to grant credit against I securities.
Having reaped the benefit of experience for three quarters of a century, and with reformation in the methods of working governed by a policy adhering to the principles and practices of sound arid conservative banking, native banks to-are better than ever equipped to aid the commercial and financial development of China.
Text read from the printed page and cleaned; old type leaves the occasional error.