SHARKS RUIN BUSINESS MEN.
New Line of Financial Graft.
A new loan shark, or self-styled "financial agent," who preys on the business man and manufacturer, robbing him of his money and business more relentlessly than the old-time loan shark ever dared with the helpless wage earner, has made his appearance in Chicago and says he has come to stay.
MR. FIRST MORTGAGE; FIELD OF RISKY INVESTMENTS
Under the guise of discounting a manufacturer's accounts at his usual rate of discount, the "financial agent" secures his first hold on the struggling manufacturer, who sees the opportunity to enlarge his business by collecting cash for his merchandise as he sells it. But the first step with the "financial agent" means entering the portals of bankruptcy.
The loan shark first finds for his victim an industrious, hard-working manufacturer or wholesaler, who by his push and perseverance has built a business beyond his capital, and approaches him.
"You have a good business here," remarks the agent. "If your customers all paid cash it would be pretty easy sailing. Life would be one long, sweet song if everyone paid for goods as soon as they were ordered, wouldn't it?"
Offer of Cash Arouses Interest.
Even the largest manufacturer in the country could not but accede to this.
"I have been watching your business for some time with a great deal of interest," continues the suave grafter, "and I would be glad to discount your bills at the regular rate of discount, so it would cost you nothing and you would have an opportunity to double your business.
"I presume you give the regular trade discount of 1 per cent a month for cash. On that I can save you a little money and help your credit materially. You receive 1 per cent a month on your purchases.
"This you cannot take, as you are cramped for money, because your customers do not pay their bills promptly. Thus you lose 2 per cent a month by not buying and selling for cash."
Gets $800 for $1,000.
The manufacturer begins to see a thriving business on a cash basis without exposing his weakness, and agrees to allow the banker to discount his bills.
"In the morning," begins the agent in explanation of his system, "you send us $1,000 worth of duplicate invoices of the goods which you shipped today, with shipping bills attached. You attach to the invoices a note for $1,000, so the account may be kept from the notes, and not from the invoices which we hold. In return for the note we will send you a check for $800, less our commission of 2 per cent a month, just what you are paying now because your business is not done on a cash basis. The $200, or 20 per cent, we have to deposit in the bank which loans us the money which we in turn pass to you. When any bills are paid we will refund your 20 per cent which we hold. Any bank compels us to have a representative in your store to look after our interests, as a matter of form. We will just appoint your bookkeeper—a matter of form entirely. Once a month we will send a man over to check up your books. He will see that none of our money has been overlooked."
Begins to Show His Teeth.
All this sounds businesslike and plausible, and the arrangement runs smoothly for a time, probably six months, to allow the manufacturer time to sell all his open accounts to the financial agent. Then the loan shark sends in a statement of the account, and, if the manufacturer complains, begins to show his teeth.
On the statement appears all money the manufacturer has received and in addition an extra charge for $50 a month to cover the services of their agent—the manufacturer's own bookkeeper. Also an additional charge of from 1 to 2 per cent for additional service rendered, although the agency has had absolutely nothing to do with the accounts beyond holding them as security. All overdue accounts are charged back to the manufacturer, and a request for a check to take them up immediately accompanies the statement.
As few accounts, if allowed to mature at all, are received by a manufacturer on the exact day when due, the check called for often is a formidable one. The manufacturer is at his wits' end. He goes to the agency post haste and, after they find it is impossible to hold him up for a check, they say:
"Oh, well, never mind, the bank—always the bank—is pressing us on those overdue accounts, but we can hold up the 20 per cent until these accounts are taken care of. That will be satisfactory, we are sure."
DEBT
Loses His 20 Per Cent.
After this the manufacturer's chance of ever seeing anything more of his 20 per cent has vanished. Each day the agency trumps up some fictitious charge of stamps, new check books, extra labor, taxes, additional fees or other charges that could originate nowhere but in the brain of a financial crook.
Finally the manufacturer finds he has nothing on his books but accounts belonging to the agency, on which he is paying carrying charges of from 5 to 10 per cent a month. The agency refuses to return his 20 per cent, which they claim has been charged off by the bank to take care of the overdue accounts.
The victim, seeing the plight in which he is placed, demands an accounting and threatens legal proceedings. The agency in turn demands he give them an itemized statement of each account, which they have. They agree to check them up, and, if found correct, promise to give him a check for the 20 per cent which they hold. That night the light burns late over the bookkeeper's desk in the manufacturer's office. In the morning the statements go to the office of the loan shark, who says:
"I'll have the auditor check them up and send you a check as soon as we find out everything is straight."
Trade Statements to Customer.
The manufacturer leaves the office. The loan shark gets busy with the statements, and stamps each of them:
"This account has been transferred to Killem's Mercantile Company. You are notified to pay this account to no one else."
These statements are mailed to the customers. When the manufacturer returns the loan shark greets him cordially and remarks:
"Unfortunately one of my clerks mailed out a lot of your statements last night, but I guess that won't matter. He stamped on them that they had been transferred to us and sent them out as he does everyone else's. He didn't understand. I am sorry."
As expected, the manufacturer, when he sees his business and confidence abused in this manner, flies into a rage. Then the suave agent takes the bull by the horns and issues his ultimatum.
"Our bank"—always "our bank"—"thinks we are not getting all the money coming to us from your account. They demand that in the future you deposit all your checks with us. I am sorry, for I know everything is straight, but your using us as a bank will last but a few days. Everything will then run smoothly again."
And unless some friend comes to the aid of the manufacturer the agency's prophecy comes true, and it does last but a little while.