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THE MUSIC TRADE REVIEW
9
Better Financing Methods Needed in the Piano Trade
The Necessity for a Thorough Understanding Among Piano Men of the Principles of
Banking is Shown in this Article by Elmon Armstrong, of the Cote' Piano Mfg. Go.
The coming Convention in New York will
probably be the largest attended convention in
the history of the industry. One of the large
Western manufacturers told me a few days
since that he had sent out 200 letters to various
customers in the Middle West asking if they
expected to attend the Convention. He got
prompt replies from 118 stating they expected to
attend the Convention; that they would be
deeply interested in the proceedings in New
York, and the concensus of opinion -was that
New York and Chicago are the two logical
cities for the National Convention and that
the Convention should be held at no other
places.
The amalgamation plan is progressing splen-
didly and Paul B. Klugh, the originator of
this, and his many friends, are looking forward
to action being taken in New York that will
complete the matter or bring it near enough
completion so that the minor details can be
worked out and the organization effected with-
in a short time.
vSeveral years ago at the Convention; the ques-
tion of a credit department was raised by James
F. Broderick of the Straube Piano Co., and
supported very loyally by a number of other
manufacturers, but it was never worked out
thoroughly and there is as much need for a
credit bureau in the Association today as there
ever was. Notwithstanding the fact that there
is a close relation between the dealer and the
manufacturer, and notwithstanding the fact that
a vast amount of notes given by dealers to
manufacturers are discounted by these manu-
facturers with the banking industries of the
country, yet there is a lack of knowledge, on
the part of the dealers, of banking minutia
which makes business a burden to manufactur-
ers and makes the credit element of the piano
business, which is the largest part of the busi-
ness, a nightmare to the manufacturer, and very
often a great injury to the credit of the dealer,
for the simple reason that the dealer does not
really know the manufacturer's needs and does
not take care of his credit in the proper man-
ner. To illustrate: I know of a manufacturer
in Chicago who is a warm friend of his dealer;
has sold him for years; extends him liberal
credit. The dealer is a good fellow, honest,
upright; is a factor in his community; has been
in business for years; has bought from this
manufacturer for a long while; and does a good
business for the manufacturer. Not long since
this dealer owed a note of $800.00 to this manu-
facturer. The note had been discounted in the
manufacturer's bank. The dealer wrote the
manufacturer from another state, two days be-
fore the note matured and told him to hold the
note about three days and he would take it up.
The manufacturer got this letter the day that
the note was due. This note had been dis-
counted with the bank and had probably passed
through two or three of this bank's correspon-
dents' hands. It was too late for the manufac-
turer to aid the dealer. It was an impossibility
to "hold the note." It went to protest. In
three days the dealer sent his check for $800.00
with interest, but refused to pay the protest
fees and complained to the manufacturer be-
cause he had not held the note a few days. He
laid stress on the point that he had bought
goods for years;, was honest and he thought
that the manufacturer should have granted him
three days longer time to pay the note. What
was the result? The dealer injured his credit
with the manufacturer's bank. The commercial
reports lowered the credit rating of the dealer.
Later the dealer wanted a car of pianos on his
usual term's. The manufacturer who pays cash
for his material and has to pay cash for his
labor every Saturday, sold the car of goods to
the dealer; took his notes and went down to
the bank as usual to discount them. He was
informed that this dealer had let his note for
$800.00 go to protest and that his credit was
injured. He was told very firmly by the banker
that " y ° u know this dealer has let his note go
to protest. Why have you given him credit?"
The manufacturer replied that the note had
been paid three days later and that he had done
business with this man a long while and knew
he was "all right." The banker simply replied
that "this man is 'credit marked.' His rating
has been lowered. He has protested his paper.
We do not want it. You may call this good
but according to the rules of business every-
where else except in your peculiar piano busi-
ness, this man has forfeited his right to credit.
Confine him to cash until he can take care of
his paper or carry his notes in your safe." The
banker further said to the manufacturer that
"if you do extend him credit we will feel that
your judgment in business is poor. You ought
not to take paper from anyone that you could
not offer to this bank or to any other bank."
In this article I am telling the exact situa-
tion, so that some of the dealers will realize
the condition of the manufacturers. Now, had
this dealer, ten days before the note matured,
sent his check to the manufacturer for $400.00
and a new note for sixty days, ninety days or
even four months and given the manufacturer
time to handle this business transaction, he
would have been glad to have accommodated
his dealer and would have been able to do it.
The protested note could have been averted;
the dealer's credit rating preserved and the
future dealings would have been more satis-
factory to the bank, easier for the manufacturer
and better for the dealer. But this dealer still
thinks today that he did better by letting his
note go to protest and paying it three days
later. He cannot see the manufacturer's side
of it nor the banker's side. His reasoning is,
isn't it better to get the money three days later
than to get half of it and wait four months for
the balance?
There are few dealers that know much of the
minutia of banking. Nearly all dealers imagine
that manufacturers are very rich and are swim-
ming in money, when as a matter of fact the
largest manufacturers in the country are ex-
tending credit and are constantly "loaded" with
notes. The ready cash requirements of the
m-an.ufacturer are enormous.
But reverting to the instance referred to
above, this dealer owed this manufacturer
$3,800.00 worth of notes besides this $800.00
note and besides the car that he purchased.
Some of these notes were in the manufacturer's
safe. Some of them had been discounted with
the manufacturer's bank and others had been
endorsed to supply houses and different con-
cerns from which the manufacturer bought ma-
terial. This dealer's credit was affected; his
rating had been injured and this manufacturer's
attention was called to this and in two instances
he was politely requested to send a check and
take up the dealer's note as it was thought this
dealer was "in bad." Little does this dealer
know the injury he has done the manufacturer
here in Chicago by letting that $800.00 note
go to protest. On the contrary, he feels the
manufacturer should have at least had that note
held three days and he feels unkindly towards
the manufacturer because it was not done. He
does not know enough to know that under the
circumstances it was an impossibility to com-
ply with that request.
This instance illustrates things that are trans-
piring often in the business. It illustrates one
of the things that should be corrected. Dealers
should be educated to take care of their credit
for the general good of the manufacturer and
the dealer and the industry at large. Another
thing the dealer should be educated to do is to
settle his bills promptly either by note or cash.
It i9 an open secret in the trade that a good
percentage of the dealers who are to settle their
bills at the close of the month by note, do not
do so. Statements are sent them and notes re-
quested and in many cases the manufacturers
make out the notes and send them to the dealer
and request the simple signature. Instead of
the dealer immediately signing those notes and
sending them in they "neglect" it or they delay
it for weeks and sometimes months, and it is a
fact that a good percentage of the dealers are
guilty of this lax way of handling their busi-
ness. They seem to imagine that the manufac-
turer does not need the no
ing to mature for a few months and that it
does not make any difference when the note is
sent. They do not seem to realize that the
manufacturer has to meet his payroll in cash,
to pay for his supplies at the close of the month,
and that these heavy demands require cash and
that if their notes came in promptly the manu-
facturer would be fortified with good notes
which he could take to his bank and utilize if
he needed it. In talking with a large manu-
facturer not long since, he stated that this was
one of the most worrying features of his busi-
ness; that often they had been in dire need of a
number of good notes to raise a certain sum of
money on an exact date, and that they had often
written to their best dealer friends for these
notes and had continued to write for a month,
every few days, and finally would resort to tele-
graphing for the notes. Then they would get a
jocular letter from the dealer saying "What is
the matter with you? Keep your shirt on. I
am going to send the notes," but that dealer
would not enclose the notes with that letter. A
week or ten days from then, after the manu-
facturer had scrambled around to raise the
money to meet his immediate demands and had
spent moments of anxiety and days of worry
looking for that dealer's notes and writing other
dealers, the notes would come in, but long after
they had been needed and after the manufac-
turer had been forced to make some other stren-
uous turn to meet heavy obligations.
This manufacturer, in speaking to me, called
attention to the fact that sometimes when they
would ship out a car of pianos, the railroad com-
pany in handling the pianos would damage some
piano. The dealer would make a claim of dam-
ages against the manufacturer for $10 or $15 on
that particular piano and would hold back the
settlement on the entire car load for a month
and during that time would be corresponding
and squabbling over the question of whether
the liability was the manufacturer's or the rail-
road's. All this time the manufacturer would
be out of his settlement. Finally the notes
would come in. In such a case, would it not
have been better for the dealer to have sent in
the settlement less the $15 and discussed
that with the manufacturer? If it finally de-
veloped that the manufacturer was liable
through a failure to box the piano properly, that
small item could be arranged, and if in an ex-
change of views on this question it developed
that the railroad company was liable, then the
dealer could make his claims against the rail-
road company and settle the $15 with the manu-
facturer, but as this manufacturer said to me,
it seemed that the dealer thought the manufac-
turer could "carry the burdens of the world."
They seem to have no feeling of sympathy for
the manufacturer; no desire to co-operate with
him to the benefit of both parties. This manufac-
turer was of the opinion that at the coming con-
vention matters like these referred to in this
article should be handled in an open, frank
manner; that a better understanding should be
reached between manufacturer and dealer and
a systematic basis established for the conduct
of the business and the handling of the vast
credit of. the industry.