No matter how great the amount of capital invested in a business it would not be sufficient if the contractor had to pay cash for all of his purchases. Even though it were sufficient, paying cash for all goods bought is inconvenient and attended with delays that would go far toward cutting down the profit on a contract. For these reasons, as soon as a man starts in business he should take steps to open a line of credit with the supply houses with which he wishes to deal. No better way of going about this operation can be found than to submit a written statement of the resources and liabilities of the individual or firm, together with a list and addresses of people with whom they have had business dealings, and of others who have known them for a long time and can vouch for their honesty and ability.

In deciding as to the amount of credit to extend to a new concern a supply house will consider not only their honesty and present ability to pay, but likewise their chances of succeeding in business. In their judgment of the likelihood of success or failure they will be guided to a great extent by the technical and business knowledge of the applicant, his sobriety, energy and general manly qualities. These qualities are exhibited to an intelligent credit man by the manner in which the applicant asks to open an account or secure goods on credit.

If, when duly engaged in business, it becomes desirable to purchase goods from a concern with which there has been no prior business dealings, an order may be sent in, but accompanying the order should be a statement of the business, together with a reference to those concerns from whom goods have already been purchased. Most supply houses would sooner have the statement of another supply house as to the way an applicant's bills have been paid than any other kind of information that can be furnished. It is of little interest to them that the applicant has a fairly large cash balance, but is slow in the payment of his bills, taking sixty to ninety days before remitting, and then only after having been repeatedly dunned. They would sooner do business with a contractor who has less working capital but, through being energetic in the conducting of his business, is able to turn the money over faster and is always prompt in the payment of his bills, even to the point of discounting them. Do not be afraid to give a frank, honest statemerit of your present worth, and so conduct your business accounts that every person from whom you purchase goods will not only be anxious for a continuation of your trade, but will give a good account of you to whoever may apply for information.

Before you have been long in business, in fact, as soon as you try to open an account with a supply house, you will be asked by the mercantile agencies to supply them with a statement of your financial resources and the names and addresses of references. Their applications should be as frankly and as honestly complied with as the statements to the supply houses, although, for special reasons, there might be some questions of the mercantile agencies which you do not feel called upon to answer, while at the same time not withholding the information from the supply houses.

It might be well to add that it is better to take up the matter immediately with the supply houses and learn what line of credit they will extend to you, and not wait until a bill of goods is wanted, then have to wait while they look you up and decide as to your responsibility. It is one of the preliminaries of business that should be settled definitely and immediately, so you will know just what to figure on in the way of credit. Of course, the credit originally extended will not be as large as will afterward be granted if the individual or concern is successful with the business and prompt in the payment of bills, and as credit is the backbone of any business it should be guarded zealously.