When the credit department has reported upon the standing of a given borrower, that standing must be checked and analyzed so far as practicable for the purpose of detecting errors or flaws and of introducing the subsequent changes if they are called for. The final ascertainment or definition of the "line" is allotted to a discount committee in some banks, or to an executive committee, usually in consultation with the officers of the institutions. When the officers, working with the committee, have settled upon the amount to be advanced in the aggregate, the actual making of the loans up to the amount specified, and the taking of the proper protection for each, are necessarily intrusted to the executive authorities of the bank who are under its by-laws in charge of current relations with customers. It is then their duty to follow carefully and with attention the current operations of the business man in order to form a judgment whether his advances are being wisely used and whether changes in his condition occurring from time to time are of such a nature as to warrant a modification of his line of credit.

Classical banking theory has always held to the view that the limit of the bank's advances should be determined by the current turnover of the business man's operations. This may be stated in other words by saying that the bank should not advance funds for permanent use in business. Funds which are required either for investment in plant or for current working capital should be obtained through issues of stock or bonds, and should be a part of the regular assets of the enterprise. The idea may be put in another way by saying that the amount of credit which the bank extends to the business house should be determined by the amount of credit which the business house extends to others. Exactly how to ascertain this limit upon the volume of credit in any given case is a technical matter. An illustration will suffice to make clear what is meant. Suppose that a certain enterprise is capitalized at $500,000, all of which is paid in in cash. The concern with this sum of money purchases or builds a plant worth $250,000. It invests $150,000 in machinery and equipment. The $100,000 balance of its initial $500,000 is placed in bank for the purpose of meeting current expenses. We may suppose that the concern immediately begins manufacturing and puts salesmen in the field with instructions to dispose of the goods. In advertising, in exploitation, in the payment of the salaries of salesmen, representatives, in rentals, and in various other ways it uses, let us say, $75,000 before it has begun to receive a large flow of orders. Up to this point there is no basis for an application for bank credit. The business has invested its capital, and what it has to show by way of results is either plant, equipment, or goodwill. Now it may be supposed that as the result of its operations it begins to receive a volume of orders which result in purchases of raw material, the payment of wages to labor, and in other expenditures which contribute to the actual production of partly finished goods. As the goods pass into the hands of buyers it establishes on its books accounts representing the debts due from these purchases. The concern is now a suitable applicant for bank credit and the amount to be extended by it will be limited by its expenditures for material and labor, as well as for delivery costs and the like, and will be represented by open accounts on its books. If it applies to the bank for funds it will do so in order to realize in immediate resources what is expected to come in to it within a reasonable credit period. The bank supplies these funds, and is able to do so because other business houses which are at more advanced stages of the process of production and distribution are currently depositing their receipts with it. The bank thus equalizes the supply of available funds or of credit among the different branches of business.