As a general rule, retail merchants are not entitled to unsecured advances on their own name. A storekeeper who takes considerable credit from the wholesale trade should be able to obtain all his credit from that source. If his position is not such as to enable him to do this, a bank should not intervene unless he is able to put up good trade bills or other security. A bank has only the bare interest in the loan, while the wholesale merchant has a margin of 20 or 30 per cent profit to fall back on in case of loss. If the loan is sought for the purpose of paying cash for goods purchased, it should be borne in mind that the usual discount granted by the seller for cash is 12 per cent per annum or more, that being, in effect, his estimate of the degree of risk, while for precisely the same risk the bank is asked to be satisfied with seven per cent or even less. The mere transfer of an obligation from the mercantile creditor to a bank does not diminish by one-half the monetary risk of the accommodation; it is illogical and irrational to assume such risks for an ordinary banking rate of discount.

Loans to retailers are dangerous both to the bank and to the borrower; to the bank on account of the risk, and to the borrower because it frequently leads to lax methods of collecting.