The nature of the assets should be considered, however, as this may vary the amount of shrinkage greatly. If the assets consist largely of staple merchandise and secured notes or accounts, the shrinkage may be comparatively small, especially if the market for such goods or products is an advancing one. On the other hand, old goods and stale accounts are subject to a fearful shrinkage when an attempt is made to convert them into cash.

Written and signed statements of assets and liabilities are now exacted of customers applying for any considerable amount of credit, by wholesale houses and banks, thus placing the facts in such form that in cases of misrepresentation the person signing the statement may be punished for fraud in "obtaining goods by false pretenses." Buyers may intend to be honest in their statements, but are frequently optimistic and inclined to overestimate their resources and ability to pay. The written statement tends to reduce the problem of "facts and figures," and dispel illusions. It is also customary to request references in order to ascertain how a firm stands in the estimation of others, but these are of much or little value, according to the motive of the writers. A jealous desire to injure a rival may cause an unfavorable report, or a disinclination to injure a friend may be the motive for a half favorable reply concerning an undesirable customer. Banks are constantly asked concerning the financial standing of their customers, but it should be remembered that a man often keeps faith with his banker when he stands poorly elsewhere, and thus the banker's opinion may not be accurate.

Commercial agencies greatly facilitate credits by furnishing information concerning the financial status of business firms and individuals. This information is collected in a variety of ways, by special reporters, lawyers and others, and supplied confidentially to subscribers. In this era of extensive and varied uses of the credit system, a systematic method of collecting information concerning firms and furnishing it to those who are properly entitled to receive it, is of immense advantage. In addition to quarterly and semi-annually revised reference books the mercantile agencies undertake to furnish their subscribers with special reports, consisting of detailed statements of facts concerning the financial status of every dealer of any consequence in the country. The mercantile agency also takes cognizance of mortgages, judgments and transfers of property upon the county records, and preserves the facts concerning them upon the agency's records. They endeavor to get "Signed Statements" of assets and liabilities from the debtor class whenever possible, and thus a mercantile report, made up from a variety of sources, is of great advantage to every dispenser of credit, especially as the courts have held that under certain circumstances a statement furnished a mercantile agency is as binding on the maker as if furnished a creditor direct. The reliability of these reports cannot always be depended upon strictly, but the prosperity of the companies engaged in that field of research is an evidence that the public has confidence in them.

The facts gathered by the mercantile agencies* are not public property, but are furnished under restrictions to subscribers to the agency only. It has been decided by the courts that the agencies are not responsible for inaccuracies of their statements, nor can they be prosecuted for libel on account of furnishing facts which may prove damaging to the business standing of a dealer. These institutions aim to verify all important facts before sending them out, and since no malice can be shown, in case of error, there is little room for litigation. The commercial agency is ever on the alert for every item of information which would seriously affect in an injurious way, the credit or financial standing of a dealer. The recording of a chattel mortgage, confession of a judgment, sale or other transfer of property, are noted, and in the case of an absconding debtor his whereabouts is frequently disclosed by the reporter or correspondent of the mercantile agency.

♦The principal mercantile agencies are R. G. Dun & Co. and Bradstreet's, although there are a number of lesser importance.

Mercantile Agencies

In addition to the mercantile agencies we have credit associations in many of the different lines of trade, in which a large number of the firms and dealers are banded together for mutual protection. A bureau is created and the information required by members obtained by a clerk employed by the bureau. The main object of these associations is mutual aid in the matter of credits. Buyers who fail to meet their bills are prevented from obtaining credit from other houses, by having their past record brought to the attention of all members of the association, and thus by a variety of means, business firms aim to guard the expansion of credit, and permit its proper and conservative use.

The laws with reference to the collection of debts in different localities must also be considered when extending credit. In some states the laws are framed in a manner decidedly favorable to the debtor class. The exemptions are large enough to shield several thousand dollars worth of property, and the "laws delays" are more than necessarily numerous. Especially in the western frontier states where it is perhaps intended to attract settlers by favorable laws, thus giving the pioneer an advantage to offset the hardships which he must undergo, in opening up a new region, do we find the laws most favorable to the debtor. In the eastern and more populous states the laws are more equitable and judgment and execution can be more quickly obtained. Every successful credit man must be conversant to a limited extent, at least, with the laws of the states in which he does business.