successful group of oil men: "We don't have to ask people to come in with us: we let them in."

The experience of the farmers in a country district not a hundred miles from New York shows this same ease of financing under proper conditions. The farmers of the neighborhood had quarreled with the dairy concern to which their milk was sold. The price paid was inadequate or so it seemed to them-and they declined to send their milk to the company's creamery until the price was raised. The company refused to pay more and the milk was withheld. Some of it went to far-distant creameries, some to the pigs, some to waste, but none of it to the creamery. The deadlock was ruinous to both the creamery and the farmers, but neither would yield. Finally, the president of the local farmers' association-himself a successful farmer-proposed to his associates that they lease the creamery and run it themselves. The suggestion was received with approval and he was authorized to close the lease if it could be had at a fair figure. He called upon the representative of the creamery and made his proposition. The representative came back with the suggestion that instead of leasing they buy, offering the creamery to them for $50,000.

This price was considerably below the original cost price of the creamery, but seemed a large sum for the farmers to raise. The president of the farmers' association, however, got the offer in writing, called a meeting the same day, laid the proposition before the assembled members, and recommended the purchase. He took subscriptions then and there to the amount of $10,000, arranged for further subscriptions among the farmers of the neighborhood, secured aid from the local bank, and in three days had obtained the needed funds. The creamery is now in successful operation under the management of the farmers themselves.

When Financing Is Difficult

In the majority of cases, however, such favorable conditions do not exist. Successful business men, as a rule, are fully occu

pied with their own pursuits and have no time to interest themselves or others in new lines of industry or novel mechanisms. They are already profitably busy and usually take up only such enterprises as come to them in the course of business.

For this reason perhaps a majority of the enterprises brought forward for financing are in the hands of young or inexperienced men, overly enthusiastic and sadly lacking in judgment; of inventors, often mentally ill-balanced and wildly impractical; of unsuccessful business men warped by their reverses and snatching at straws; of adventurers without money or reputation and anxious only to turn a penny without regard to the means employed.

To this must be added the further facts that men are too frequently but "indifferent honest" and, speaking generally, too anxious for the success of their particular undertakings to be precise and exact in their representations. Also it must be borne in mind that their undertakings-"touched up" to appear as "golden opportunities”—are too often, doubtful, defective, or even impossible, and that their terms are apt to be as remarkable as their offerings, not uncommonly requiring the proposed capitalistic victim to put in all of the necessary funds, take a small interest in return, and leave to the owners or promoters the control of both enterprise and money.

When all this is taken into consideration, the hesitation of the man with money even to investigate, much less to embark in "unaccredited" enterprises, may be readily understood.

All this misrepresentation, chicanery, and extravagance of statement and demand, react to the very great injury and disadvantage of legitimate propositions. It explains much of the difficulty of financing and should be very clearly understood by the man who has an enterprise which requires financial help.

Indeed, it may be said in defense of the capitalist, that, while he very frequently does take advantage of the ignorant, the unsuspicious, or the necessitous inventor or owner, he is at least as much sinned against as sinning, and that for every man with an enter

prise who has been "frozen out" or harshly treated by his financial backers, it would be possible to discover a hundred men with money who have been drawn into unprofitable or impossible undertakings by misrepresentation, or suppression of facts, or by even more flagrant fraud.

The Opportunity for the Good Enterprise

To turn from the standpoint of the promoter to that of the investor, it may be said that the profitable and fairly safe investment of money is usually a matter of real and serious difficulty. Savings banks now offer 31⁄2 to 41⁄2 per cent; first-class city real estate mortgages pay 6 to 7 per cent; the usual good bonds and gilt-edged stocks about the same; Liberty bonds can now be bought to yield 5 per cent and more; and good preferred stocks may be had to yield 8 per cent. All these are reasonably safe, but are not large revenue-producers.

If better rates are desired, a certain added risk must be taken and even then really good investments are not to be picked up everywhere. Established enterprises, as a rule, offer the investor but little more than the prevailing interest rates. If then a materially larger rate of profit is desired than that of the gilt-edged security, an investment in some more or less unknown, undedeveloped, or speculative enterprise is the only resource. For this reason, if the man with money to invest has not yet reached the age or the time when the small returns of the safe investment allure him, he is rarely so occupied, so indifferent, or so difficult of access that the right kind of enterprise, properly presented, will not command his attention. Whether it will secure his money depends upon the ability of the presentation and the strength of its attractions for him.

Opportunities for more or less speculative investments are offered the investor in abundance, but the majority of these are as risky as they are-according to the statements of their promoters-profitable. Under these circumstances, if the man with

a really good enterprise and a fair proposition can approach the people with money and convince them that his enterprise is sound, that, if it is to be under his control, he is capable of managing it successfully, that his standing and integrity are such as to justify their trust, and that the returns to be reasonably expected are sufficient to warrant the business risk involved, he will have no trouble in securing all the money he ought to have.

Reputation as a Basis for Financing

Of all these requisites, a reputation for success and for honesty is perhaps the most important. The majority of business men when considering an investment outside their immediate lines of business, cannot take the time and trouble and incur the expense involved in the proper investigation of an offered enterprise, even were they capable of so doing. Neither are they able, after investment, to supervise their interests so closely as to protect themselves against dishonest management or equally bad from the standpoint of results-inefficient management. This being true, the average man would rather entrust his investments to a friend in whose honesty and ability he has confidence, merely on the strength of his statements, than to a stranger, or to a man of doubtful integrity or unknown ability, even after the most searching investigation of which he is capable.

It must be confessed that there are numerous startling and remarkable exceptions to this general rule-cases where men give up the savings of years to persuasive strangers of whom they never heard before, and of whom very frequently they never hear after; gold bricks are purchased not only in rural neighborhoods, but with even greater freedom in the city of New York; extravagant, heavily capitalized, and widely advertised enterprises continue to reap astonishing returns from subscriptions to stock if not from actual operation; Ponzi and his 50 per cent in ninety days is not yet forgotten by his confiding clientèle, and the enumeration might be continued indefinitely and most unprofitably.

These curious and shady happenings are, however, abnormal. They are the "sports" of the financial world and, while they are not uncommon, the ordinary man can hardly expect, and the honest man will not wish, to profit by anything of the kind. On the contrary, in the promotion of an enterprise, as in its later conduct, honesty properly fortified by ability and a knowledge of business procedure must still continue to be the best policy, and it is on the uninflated and solid basis of good reputation and fair representations that the best financing is and must continue to be done.

Ideal Conditions for Financing

To sum up, the ideal conditions for financing require:

1. An enterprise

(a) Basically sound.

(b) Worth while.

(c) In the best condition its state of development will permit.

(d) Attractive to those who are to be asked to invest. 2. A practical and well-matured plan of operation providing for

(a) Honest and capable management.

(b) Adequate working capital.

3. A fair and attractive offer.

4. A presentation timely, adequate, and convincing—

(a) To men with money to invest.

(b) By a man who commands their respect and confidence.

Under such conditions the financing of an enterprise is easy. The more widely they are departed from, the more difficult the financing becomes.

VOL. I-2