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THE
JANUARY 19, 1924
11
MUSIC TRADE REVIEW
Financing a Retail Piano Business
Walter L. Bond, Treasurer of the Weaver Piano Co., York, Pa., Points Out the Necessity of the Retail
Merchant Maintaining an Adequate Reserve of Lease Paper if He Discounts These Assets to Obtain
Liquid Capital—Meeting Maturing Obligations With Current Collections
W
ALTER L. BOND, treasurer of the
Weaver Piano Co., Inc., York, Pa., has
taken occasion in a letter to commend
The Review for its editorial in the January 5
issue, wherein retailers were advised to make
full and proper use of the quantities of instal-
ment paper piled up during the holiday selling
season instead of allowing the paper to lie in
the safe subject to the simple bank interest paid
by the purchaser.
"York, Pa., January 12, 1924.
"Editor, The Music Trade Review:
"We have read, with a great deal of interest,
the first editorial in your issue of January 5,
1924. You have touched upon a very vital fac-
tor in piano retailing and one to which we think
you can properly give more attention.
"Your third paragraph does not convey the
impression which we believe you intended it
should. Piano paper in a dealer's safe is 'stag-
nant capital' only to the extent that the col-
lections on it are neglected or the customers
whose names appear on it are not able to pay.
The very best way to realize on piano paper is
to get the money from the customers. Under
any other plan we know of the money must
be paid back, but when it is collected from the
customer it is not necessary to pay it back.
"Likewise, it should be borne in mind that
when piano paper is sold to a finance company
the payments of the customers are guaranteed
as they mature. To do this a dealer must main-
tain a sufficient reserve of unpledged paper, the
collections on which he can use to make up any
payments missed by customers whose paper he
has sold. The proness of customers to miss
payments even in times like these is great. In
times of depression like 1921 collections fall
off greatly and the dealer without a good margin
of paper in his own safe cannot meet his obliga-
tions in such a period. We feel sure you did
not mean to convey the idea that an adequate
reserve is 'stagnant capital.'
An Adequate Reserve
"Again, if a dealer borrows money with leases
as collateral, or if he buys on long time notes
with leases as collateral, it is important to him
that he have an adequate reserve. His probable
collections, under the most adverse business
conditions a reasonable man can foresee, must
be great enough to retire his obligations as
they mature. Otherwise he will be at the mercy
of his creditors, who in many cases may be
unable to grant him extensions even if they
want to. An adequate reserve is a vital neces-
sity in times of depression. It is an insurance
fund against embarrassment in time of need.
"There is another phase of the use of paper
that is too little understood by the dealer and
that is his practice of completely parting title
to his paper when he retains an interest or
property right in it. This practice has in times
past brought many otherwise successful dealers
to grief and to bankruptcy. A dealer who as-
signs his paper when he still has an interest in
it should protect himself by contract and by
showing in the assignment on each lease or
customer's note that the assignment is subject
to this contract. This contract should plainly
set forth the dealer's rights to the final proceeds
from the paper, as well as the conditions under
which the holder may realize on it. Such a
contract and the assignment of the paper made
subject to the contract will protect the dealer
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should the paper pass into the hands of an
innocent holder for value, and, in fact, under all
other circumstances.
"May we say that the consignment plan is
the most nearly ideal plan of long time financing
yet evolved. We speak from the dealer's stand-
point. It meets the best theory of credit which
is 'obligations should come due when the money
to discharge them is received.' Under the con-
signment plan a dealer does not owe any money
on instruments sold until he has first collected
it from his customer. No collections—no pay-
ment to the manufacturer; little collection—little
payment to the manufacturer, and in most cases
he even retains a part of the amount collected.
He does not need a reserve fund to make up
payments that are missed by his customers
during periods of depression. The cost of it is
no greater than the plans which require such
a reserve. He does not part title to his prop-
erty right in the leases if he assigns them only
'as per contract.'
"We have given much thought to this sub-
ject, over a long period of years, and have wit-
nessed many successes by dealers who properly
protected themselves in financing and much dis-
tress brought about by improper financing.
Therefore, we feel it important that you do not
let any dealer get the wrong impression on this
vital subject.
Why Some Dealers Fail
"In conclusion, many retailers bring much
grief upon themselves by selling without a
proper margin of profit above the overhead ex-
penses and by giving too long terms of pay-
ment and by not being sufficiently vigorous in
their collection policy. No financing plan will
make up for these deficiencies."
"Sincerely yours,
"WEAVER PIANO CO., INC.
"Walter L. Bond, Treasurer."
Mr. Bond's emphasis on the necessity of the
dealer retaining an adequate reserve of cus-
tomers' paper in his safe, in order to protect
not only the paper which he has discounted,
but to provide for his current obligations from
his current collections, is well taken. The Re-
view, in publishing this editorial, assumed that
any dealer, in following this method of finan-
cing, would maintain this reserve as a matter
of course and would not strip himself of all
his paper.
In a series of articles published early last
year in The Review on financing a retail piano
business, which was reprinted in pamphlet form,
due to the demand from the trade for extra
copies of the articles, one of them was devoted
to this subject. In that article it was pointed
out that a dealer should maintain such a reserve.
In fact, the subject was carried further. It
was pointed out that a dealer should never dis-
count all his good paper and retain that of
dubious value in his safe, for if he followed
such an injurious method he would inevitably
find himself on the rocks.
Mr. Bond's comment along this line are fully
appreciated. He has had long experience in
all phases of the piano business, devoting par-
ticular attention to its financing problems. He
is therefore well qualified to speak with author-
ity and he gives some excellent advice to the
retail piano merchant in his letter.
Weydig Factory Output
Otto M. Heinzman
Being Steadily Maintained
Starts on Road Trip
States That Schulz Line Is Winning Wide President William E. Weydig Spending Most of
Popularity Among the Eastern Section of the
His Time on the Road With Encouraging
Trade—Sees Big Year Ahead
Results in Orders
Otto M. Heinzman, Eastern representative of
the M. Schulz Co., Chicago, started on a trip
on Monday of this week. He is now working
his way through Pennsylvania and New York
State and will cover additional territory before
his return to the metropolis. Before leaving on
his trip Mr. Heinzman stated to a representa-
tive of The Review that he believed that 1924
will be even a better piano year than last year.
"As far as the Schulz line is concerned," he
said, "the progress which I made in the terri-
tory I covered during the last twelve months
was very satisfactory, but I look for much bet-
ter business throughout the coming year. The
reputation established by the M. Schulz Co.
for manufacturing a thoroughly high-grade
product, the standard of which is always rigidly
maintained, has been a very impressive factor in
the building up of a large following here in the
Eastern States. Taking into consideration the
various improvements which have been made
from time to time in the Schulz pianos and
player-pianos, and the many refinements which
are embodied in these instruments, together with
the natural progressiveness of the Schulz organ-
ization, I feel very confident that the sales
throughout the Eastern territory for 1924 will
be much larger than ever before they have been
in that section."
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William E. Weydig, president of the Weydig
Piano Corp., New York, has been doing con-
siderable traveling since the first of the year,
which has resulted in a very encouraging
amount of business, keeping the Weydig factory
busy steadily. Mr. Weydig is now spending
hve days a week on the road and during one
of his short stays in the city stated to> a repre-
sentative of The Review that he had become
very enthusisatic over the results he had ob-
tained, not only from dealers who have had
personal contact with the Weydig line during
the last year, but also from many new dealers
whom he had sold since the first of the year.
"Our motto is quality and service," he said,
"and in order to maintain this motto we have
constantly improved our product and have in-
corporated many refinements which are salient
features of the new 1924 Weydig and Whitman
pianos and player-pianos."
The Weydig Piano Corp. has just sent out to
the trade a very handsome calendar portraying
an Indian girl gracefully posed on a fallen tree
trunk on a river bank gazing into the water
at sunset.
Consult the Universal Want Directory of
The Review. In it advertisements are inserted
free of charge for men who desire positions.
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