In another important way the practices of the business community establish a foundation for, or limit to, those of the bank. This is seen in connection with the kind of settlement which is habitual between individuals. For instance, if it is customary, when A sells goods to B, for B to give A a promissory note, then it is evident that A's bank may expect to have a great many promissory notes of customers presented to it for discount, and will be in position to require A to indorse such notes, thereby making them what is sometimes, though erroneously, called two-name paper. On the other hand, if commercial custom is such that B will regard it as somewhat of an affront or reflection if A asks him for a note, the result will be that A's assets will consist of open book accounts or "charge accounts,' and that when A goes to his bank to borrow he will usually be able to offer the banker simply his own note, representing, of course, the fact that he owns bona-fide claims upon a large number of customers who are solvent and will presumably pay for the goods when their credit period has expired. In this case the business practice of the community dictates that the bank's loans shall be largely single-name paper, or "straight" notes.

This is the case, although in a somewhat different way, when A has offered B a discount for payment in cash, instead of payment at the close of, say, sixty days. In such cases the buyer B will have to arrange for the financing, and to the extent that his own funds are insufficient, will borrow from his bank and take the cash discount. Inasmuch as the cash discount is usually higher than the customary rate of interest, buyers will borrow as much as they are able from their own banks in order to pay the seller cash and receive a discount. Where this is the case, they will give their bank their own promissory note, either straight or indorsed, or, less frequently, secured by collateral of one kind or another. Those buyers who are unable to borrow will be carried by the seller in the manner indicated above, and thus the cash discount serves to divide buyers into two classes and to provide a different manner of financing each.