It is now time to see in what practical forms the problem of financing the business man presents itself. Probably the first question which the banker has to meet in this connection is the amount of credit which he is willing to extend to the customer. In American banking practice this is settled through the establishment of a "line of credit." The line of credit is a statement of the kinds and amounts of advance which the banker is willing to make in the case of a given concern. It can be determined only after a very careful survey by the credit department, subject to later review and confirmation by the proper officers of the institution.

Information regarding the credit standing of a borrower may be obtained directly from him or indirectly from outside sources. The borrower himself may furnish the bank with data in a financial statement which summarizes the assets and liabilities of his business, together with miscellaneous information. If any of the items in this statement are not entirely clear, they are then considered in a personal interview between the borrower and an officer of the bank. When concerns are seeking an especially large extension of credit, metropolitan banks at times retain the services of experts such as engineers and accountants to undertake an intensive inspection of the plant or business.

A bank does not rely entirely upon information which emanates directly from the prospective borrower, but also gathers facts regarding his standing from other sources. The most important of these is the commercial reporting agency. Such reporting organizations are international in their scope, and through the operation of numerous branches and thousands of representatives are able to gather credit information regarding firms in all fields of business activity. The analyses of these agencies are presented in reports which give the history and a financial statement of any business regarding whom inquiry has been requested. In addition, the commercial agencies compile books which contain the names of practically all business concerns in the United States and Canada, together with an estimate of the net worth or capital and of their credit expressed in the form of a rating. Besides these general agencies, there are also special organizations which collect information concerning the firms in a particular line of business.

A bank may secure further credit information by communicating with persons who have had business dealings with the borrower whose credit standing is being considered. An inquiry is therefore addressed to banks which have carried the account or have had business transactions with the person or firm under investigation. Satisfactory information may also be secured by soliciting other concerns in the same line of business. The opinions of these firms, whether friendly associates or active competitors, are given full consideration in determining credit ratings.

Usually the individual who seeks a loan is at the same time a customer of the bank, and so additional facts can be found in the records of certain departments. From the bookkeeping department the average deposit balance can be learned, and from the loan and discount departments the history of past loans can be disclosed. An almost limitless mass of general credit information relating to applicants for loans may be uncovered in the daily newspapers and in the financial weeklies.

The information thus gathered from direct and indirect sources is collected in credit folders, each filed according to the name of the borrower. This record book contains the business history of the applicant. It also includes a complete financial statement of his current assets and liabilities, and a comparative survey of these items covering a period of several years. Interviews by officers of the bank and reports by field investigators are presented in brief. A statement is also made of the average balance and extent of previous loans of the borrower.