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same old way, paying high rentals and clerk hire with unneeded help on the pay rolls, as we fully believed that dull business and tight money was only temporary. Like Will Rogers, all we knew was what we read in the papers. As you gentlemen of the committee well remember, official Washington repeatedly and emphatically insisted that there was no real depression and that business would soon be back to normal. Fully believing this we carried on to the point where profits were changed to losses, and ere long our entire reserve resources were dissipated. We were forced to discharge help, reduce salaries and run our businesses on a hand-to-mouth basis. Collections were reduced to a minimum.
In explanation of that statement I will state that up to the year 1930 I was doing a business of approximately $75,000, and I had on my payrolls, clerk hire that ran to $390. In 1931 that $75,000 was reduced for some unknown reason to $15,000. That occurred in the place I had been operating in for a period of 17 years and with the same management, the same location, and the same help or a majority of the same help.
Banks would not make any long time loans, or any loans at all without more than adequate security which we were unable to furnish. Due to tight money and poor collections the wholesalers were unable to continue our credits. Consequently we soon found our stocks of goods and merchandise unequal to the daily demands of our customers even in the dull days of the depression. Now that there is a decided pickup in business by reason of increased purchasing power caused by governmental aid to various industries, we find our stocks woefully inadequate to present day business demands; and we can see no way to remedy this situation unless Washington comes to our aid.
In reference to that I will state that the vast amount of Government money that is being allocated to different sections of the country has caught practically all the merchants of the country down to the point that they have not any money, have not any stocks, and they do not know exactly which way to turn. The wholesalers have been hit so hard during the past few years that their credits have been practically cut down or cut off, and if not cash it is no longer 60 days, but it is approximately 10 days, and on account of what he has gone through in the past few years he has not sufficient stock to take care of him for fear that at the end of the 10 days he will not have sold it and it will be on his shelves and he will be unable to pay and the wholesaler will naturally close in on him.
I wish to call your thoughtful attention to the following: It is stated in a summary of the retail census of 1933, prepared and issued by the Census Bureau, that the depression took a toll of nearly onehalf of the dollar volume of business done by retailers, and that there was a 30-percent decrease in full-time employment, a 43-percent decrease in pay rolls, and that 1,000,000 employees were dropped from pay rolls entirely by the small merchants and business interests of the country as a whole.
That is a matter of official record in the United States Census Bureau.
The press of November 11, last, carried a report of a committee appointed by the Census Bureau to investigate conditions of lesser industries. This report, which was prepared by Mr. Theodore N. Beckman, chief economist, states that liquidity mania, coupled with
the amassing of large sums in the hands of bankers without distribution, has reduced employment, restricted production, and curtailed consumption. Dr. Beckman recommended the establishment of 12 banks throughout the country to be capitalized at $2,000,000 to take care of this situation.
I do not believe, gentlemen, that you will dispute the proposition that neither speedy nor complete recovery can be attained without the proper and successful conduct of the general mercantile business, as the retail dealer is in the final analysis the actual distributor of practically all manufactures and production.
Improved mercantile conditions would be at once reflected in larger bank clearances, heavier loadings, and a speeding up of manufacture and production. One economist went so far as to estimate that for every thousand dollars invested in the mercantile business there would be an actual additional turnover of $50,000 in general business within the space of 1 year.
Being convinced of the vital necessity of Federal aid for small business, last fall I prepared a plan for the relief of the small business man and manufacturer which I submitted to various department in Washington. It was discovered, however, that there was no established machinery by which any department could operate without congressional action. Later I learned of the introduction by the Honorable Mr. Koppleman, member of your committee, of the bill you are now considering. It is not necessary to read this plan. I will submit it for the record.
(The statement referred to is as follows:)
SMALL BUSINESS MAN'S PLAN
This is a plan whereby the Government will lend to small retail dealers and manufacturers sums ranging from $1,000 to $10,000 each, according to the exigencies of their respective business needs, to enable them to replenish their depleted stocks of merchandise and materials so that they will be in the position to fulfill the daily demands of their customers.
A large majority of these classes, during the lowest ebb of the depression, when accounts receivable were uncollectible and general purchasing power was at a minimum, were forced to let their stocks of goods and materials fall far short of their business demands, and have never since been able to properly replenish them. Loss of business and consequent profits is constantly increasing from such condition as the Government's employment program is being enlarged and purchasing power is on the upgrade. Banks would not, and will not make to them long-time loans, or any loans at all without more than adequate security, which they are unable to furnish. Wholesalers and producers, due to poor collections and frozen assets, would not and will not furnish necessary credits. General business timidity enters the equation. Adequate stocks of merchandise would result in greater bank clearances and heavier loadings, a speeding up of the manufacture and production of essentials, and increased employment of labor and clerical help.
An applicant for a loan should be required to show that he had been engaged in and materials would to a very large extent increase their daily turn-over, which the same business for at least 5 years prior to the date of his application; that he had kept an accurate accounting of his business procedure and that he had conducted his business at a reasonable profit preceding the days of the depression; and that he had a reputation for honesty and fair dealing in his community. should further be required to furnish complete and accurate schedules of his assets and liabilities, a list of employees with salaries paid them, and a report of his overhead expenses, etc. When the Government agency is satisfied by such showing and decides upon the amount of loan actually needed by applicant for the proper conduct of his business, a minimum of security should be required.
No loan should be made unless satisfactory guaranty be given by applicant. that the borrowed funds be solely and entirely expended for the necessary re-
plenishment of his stock of goods or materials and that the point of replenishment be maintained until the loan is liquidated.
When a loan is made the borrower should be required to keep an adequate accounting of his daily sales, and a percentage thereof, to be fixed upon by the Government agency, should be set aside to be applied to the liquidation of the loan and to pay his proportionate part of the expense incurred by the Government in the administration of the plan.
Loans could be made direct by the Government, or it could underwrite bank loans as is done in the housing plan.
That, gentlemen, is the situation I have found. I can illustrate several other cases along similar lines, and I will speak strictly from the standpoint of the small man. The small retailers of the country are the backbone of the entire Nation. I was impressed by the question of one of the committee members just a minute ago in which he brought out what the Government was doing along the line of helping other people. I would like to call your attention to the fact that lots of that help or some of that help might have been received by the small merchant in the way of getting possible Government help to save his home, but unless he does get the same benefit, the same help to keep his own particular business going, it is going to put some of those loans in rather a hazardous position.
Mr. KOPPLEMANN. Did you ever try to make a loan?
Mr. Moss. No; I have not. My business has reached rock bottom, but up to the present time I have not found it necessary to go into the bank to make a loan. I have from time to time used capital stock instead of going to the banks for loans. But I do know from experience with banks of the country and from talks I have had with private individuals that the banks know that the small business man is doing very little business and consequently will hesitate in giving him a loan for any length of time. Some of them can possibly get short-term loans, but a loan of that kind would be practically of no benefit to them because they would not be able to turn their stocks over and have the use of that money for any time before the paper became due.
Mr. MEEKS. Are there banks in your town?
Mr. Moss. Yes.
Mr. MEEKS. Do you have difficulty, speaking for the retailer merchants generally, in getting loans from the banks?
Mr. Moss. Very much. The banks are not extending the small merchants loans. They claim that the average merchant is not doing sufficient business to justify a loan of $1,500 or $2,000 and the bank is afraid to take a chance on them.
Mr. MEEKS. Are there other channels that make loans sufficient to keep the bank funds active?
Mr. Moss. I can illustrate that by this particular thing. I stated I did not apply for any loan. I have real estate just outside of the Government post in which my business is located. I was offered about 5 years ago $8,000 for it. I did attempt to borrow $2,000 on that from the bank. That property is bringing in at the present time $55 a month. The banks refused to loan, stating that it was garage property; it was a bunch of garages, and they stated that they did not care to have that class of loan. I then asked them for some additional property nearby, in fact, right next to that, for which I was offered a considerable sum of money several years ago, and they stated they would not care to make a loan on that because
it was too close to that particular garage; all galvanized tin garages and covered fully with insurance.
Mr. MEEKS. Did any of your business people hesitate to apply for loans at banks because they feared they could not repay them?
Mr. Moss. Yes; in the time required by the banks. The 60-day limit is the only one you can possibly get.
Mr. MEEKS. They feel that longer terms are necessary.
Mr. Moss. Longer terms and a system of setting up the method of payment so that they will know, figuring business under presentday conditions, that they will be able to repay it. My contention is that the average merchant is not any great amount of hazard for, we will say, from a thousand up to $2,500 or $5,000 to replenish their stock.
Mr. MEEKS. Do you think they would sell those stocks if they could get them replenished?
Mr. Moss. There is no question of it.
Mr. MEEKS. There is a demand now?
Mr. Moss. The demand now is coming on. In other words, I can illustrate it this way, that the small merchant up until the last few months, was for the past 3 or 4 years doing $35 or $40 a day business, and if he had an adequate stock now he could practically double that business and it would enable him to put on one or two additional clerks which he would need.
Mr. MEEKS. You feel that what is needed is long-term credit? Mr. Moss. Long-term credit, such as the bill introduced by Mr. Kopplemann, which I have thoroughly studied.
Mr. MEEKS. Do you have any difficulty with banks because of any claim on their part that the examinations made of them are so rigid that they are afraid to make loans?
Mr. Moss. Yes.
Mr. MEEKS. Is there much of that?
Mr. Moss. I cannot say there is much. I have heard that question discussed at the meetings of the chamber of commerce which I attended in the past several weeks, and it was brought up for discussion.
Mr. MEEKS. Have you heard bankers talk that way?
Mr. Moss. Yes; this was the cashier of a bank that made the assertion that their inspection was so rigid that paper prior to the past 3 or 4 years that they considered absolutely good and, in fact, they themselves being close to the lending of it knew was good, was questioned by some of the bank inspectors, and naturally they cannot afford to be criticised and turned the man down.
Mr. MEEKS. A national or State bank?
Mr. Moss. A national bank was the one I had reference to.
Mr. MEEKS. Do any business men hesitate to apply to the banks for loans because of the fear that the examiner will condemn the paper they give to the banks?
Mr. Moss. I do not think so. I think there probably is much fear of being unable to meet their obligations in the particular time required by the bank. It is as much that as it is anything else.
Mr. MEEKS. They know the business he is doing.
Mr. Moss. They know that the merchant is in their own locality and has been getting business but nevertheless he is not doing business now. They are not interested in that. They are interested in the
repayment of the loan within 60 days period or a substantial curtailment. That is what the banks ask for, more curtailment than the merchant can guarantee.
Mr. MEEKS. That is all.
Mr. Moss. One thing more, to show you to what extent there is misunderstanding of the credit situation throughout the country, and exactly what some of the Government agencies are able to do, I will read from a letter which I received from the Chamber of Commerce of the United States, dated Washington, January 22, 1935, addressed to me [reading]:
It is true that the small retailer often is in a precarious situation with respect to credit for the replenishment of stocks. It is likely that this has prevented him from carrying adequate stocks of goods with which to meet the more active demand that has developed in most sections of the country. Undoubtedly you are aware that through the Federal Housing Administration retailers may secure loans for improvement to their stores and for certain types of furnishings and equipment. We understand that this does not apply to merchandise, however.
The Federal Housing proposition has absolutely no bearing and no authority to loan to a business for the purpose of replenishing stocks of any kind or description.
That is just one of several letters regarding the same situation. That letter concludes as follows [reading]:
We believe that you are correct in sending your plan to the National Emergency Council, as this body has under consideration steps to help all types of business, including small merchants.
I thought I had with me a letter from the National Emergency Council in which they recognized the fact that some assistance must be given to the small business man and stated that in their opinion this session of Congress in all probability would do something of that kind. I am sorry I have not it with me but I will mail it to you.
Mr. KOPFLEMANN. Send it to the committee. We will meet tomorrow morning at 10:30 a. m., and I will make an effort to have those of you gentlemen who are here this afternoon heard the first thing in the morning.
(Thereupon, at 4:55 p. m., the committee adjourned to meet again at 10:30 a. m., Wednesday, May 29, 1935.)