Financing a purchase

Chapter VII Financing a purchase After this brief study of selling for ready money, a matter we believe to have been clarified, we will proceed with a discussion on financing a purchase. As this is a more complex matter, we will approach it with more scrutiny and more extensively. The necessity for such an approach arises from the fact that this has been a debatable issue among theologians of both past and modern times. In the context of this chapter, we find the statement above, that financing a purchase was introduced as a solution to money being scarce, to be correct and true. Regardless of the circumstances and disputes, this method of selling proved to be immensely useful and necessary for traders and, the truth is, it would be impossible in our day and age to do anything, and in fact nothing is done, without implementing this method of selling in the cases which allow for delayed payment. In addition, trade as such would no longer be practiced, the profession would be extinguished and the families of former traders, as well as entire states, would suffer devastating consequences. Moreover, all private and public assets would be utterly destroyed because, among other things, trading with the T urks, T atars, Moors and Berbers is inconceivable and, as a result, all the commodities that are exported from these regions would no longer be available on Christian territories, and that has no good benefit. Another consequence would be that the principal crafts (especially the more established ones and hence more profitable) such as wool and

silk manufacture, spices, etc., would become deficient and this would also lead to the devastation of towns and private assets. It would be wrong to think that money could exert similar effects. This is highly unlikely due to the fact that money is scarce in Christian regions and hence there is an insufficient amount of it for importing commodities from the “barbaric” countries mentioned above. All this supports the claim that financing a purchase as a method of sale evolved as the result of a lack of money. However, it is sensible to conclude that it proved to be so convenient and vital for traders that business could no longer be conducted without this option being available. Further support and additional examples can be provided. T raders who do not have a sufficient amount of ready money to conduct their business, supply themselves with merchandise instead. They opt to finance the purchasing of commodities which they know are deficient in certain countries and then sell those goods in the regions where there is a high demand for them. As the costs of sea transport and the time it takes could ruin not only the profit but also all the principal, the priority was always to sell large rather than small quantities. In the case that they are not so fortunate as to negotiate such a major deal and get the ready money, they are forced to agree to financing purchases in order to avoid losing their profit and principal. Offering a voucher instead of ready money, he is then able to purchase the commodities for which there is a high demand in the region where he is headed. These will be sold again by means of financing a purchase and the profit thus made is then used to cover the debt incurred when the merchandise was initially acquired. In the end, the trader

has nothing to do but close the deal, from which he profited by honorable means. But the fruits of this success are shared among artisans, manual workers, carriers, tenants, ship owners, customs officers and many others as the success of one leads to the success of another. Those who commonly reap the most handsome profit are exactly the traders who are very accomplished at financing a purchase and thus provide others with numerous lucrative possibilities in addition to making an honest living for their families. This favorable state of affairs would otherwise never exist, as it is well known that the rich who abound in ready money are generally not inclined to leave their lands, or expose themselves to the risk of losing their assets at sea. Moreover, it is seemingly inherent in the nature of the people of this breed to avoid any kind of personal ordeal. The issue of this kind of selling with delayed payment is quite sophisticated and for this reason it is not easily comprehensible, even for professional traders, for there are many problems that arise during the practical implementation of this method in everyday trading operations. Due to this, many people, even respectable scholars as well as those still inexperienced and untrained in this trade, have a negative attitude toward this method, regarding it as an utterly forbidden agreement in every respect. Many of us are greatly astonished that the contract, which by its nature is allowed, useful and necessary for the preservation of individuals (households) and cities, is being explicitly condemned by the majority of those very people who wrote anthologies on debatable ethical issues. W e intend to bring question, which we highly regard, to light, and this will be done at the proper time, and thus will distinguish between the cases

of where and when something is in fact an illicit agreement on selling with delayed payment. By default, it is never malevolent and as such it is always allowed, beneficial and needed. However, this kind of sale does adhere to certain regulations that must be complied with if it is truly to be positive and purposeful in practice. Namely, there are six factors that need to be taken into account – the merchandise you are offering, the person you are offering it to, the date you agree upon, the quantity, the gain and the method of payment. First of all, be mindful of the commodity you are selling. It must be carefully selected, appropriate, of quality and hence, not spoiled or broken as is often the case with many traders who agree to delay the payment of goods of the poorest quality possible or those they did not manage to sell for ready money. The situation is that of the glutton and the inn-keeper who do not share the same way of thinking. Y ou believe that the poor fellow got a raw deal, and he, on the other hand, does not intend to pay the debt because his circumstances are reduced, so if he is making a loss, you are to as well. For this reason, a trader should avoid selling on credit to people who will take advantage of this at their own great expense without considering the value of the merchandise. People like this should be guarded against regardless of the great trust they might enjoy for they are either bankrupt or will be soon. Second, the person you are trading with must have a good reputation, be highly respected and trusted, and known as someone who pays his dues. Therefore, you must be well informed about them and know them well. If this is not the case, consider

several factors. Namely, his physiognomy; the eyes being the primary criterion. Plinius says in one of the volumes of his Natural History: “It is beyond doubt that the spirit dwells in the eyes.” Another author wrote: “ Appearance is the reflection of the soul.” In Salamon’s words: “Beware of the person with a bodily defect, ” such as the lame, the cross-eyed, those with their mouth deformed, red haired, etc., and especially those who turn away from you when they are speaking to you. Beware of the men who ask of you to delay payment and appear at the same time to be afraid, for poverty and impotence make one fearful. Be careful in your responses and decisions because, as Seneca said: “Flush in the cheek is brought to the poor when his indigence forces him to ask for something.” Although shyness is commendable in youth, as Aristotle claims in Ethics, it is highly reprehensible in adulthood. Also avoided should be those who carry ugly surnames because, as the philosopher says, “name reflects the real nature of the thing.” That Adam named all objects for their qualities is believed by Augustin and other scholars. I have encountered men who call themselves Peter Filthy, John Stainworld, Anthony Godeceive and similar. Mind you, I have also met and have had experiences with people with some average and seemingly beautiful names which were never given to a worthy man and vice versa. I will refrain from mentioning these to avoid being tedious. As much as some lovely names can be loathed, even more so is true of names which are wicked by their meaning. For this reason, a good name is considered to be one of the gifts a father can leave his son with no costs whatsoever. The second thing a father can grant his son is to have been born and raised

in a decent country, and the third is a good vocation, because it is said that a good vocation ensures a safe living. My advice is, therefore, to engage in business with a man whom nature endowed with a pleasant physique. As nature is committed to creating vital body parts such as the heart and the brain to be functional and proportional, as the doctors claim, I am certain that if these organs are such, so are the other organs and extremities, unless they are broken or damaged due to some mischance. On the other hand, those whose heart is wicked, corrupt or painful also have other parts growing in a corrupt, evil and monstrous manner. Nevertheless, on occasion you can encounter even those who are of a good and balanced frame but, contrary to the rule, such an outside appearance does not correspond with their internal nature. This was a subject of Pitagora’s work, who required all his students to be of a pleasant appearance and with a proportional figure, as told by Aolius Gelius in Book One. W e must also be aware of the appearances of the people we engage in business with and with whom we agree upon delayed payment, and to observe whether their look is meek, their speech vigorous and cordial, and whether they are emotional when conversing with a friend. Such people are of a good personality and kind nature. Be careful as to whether he looks you in the eye and that his look is honest and mild rather than fierce, for such a look is truthful and open, not deceitful and fake. He must not be secretive. These are the qualities a trustworthy person possesses. Third, the time limit should be carefully considered and set to be as short as possible. Furthermore, the date for settling the debt should be within

a good portion of the year and close to the period of some other business, or fairs, departure of ships, buying up the merchandise, etc., or the opposite (i.e. in the winter) if you suspect a plague of some sort is looming. If there is a possibility that this could happen in your country, you must undertake some measures of precaution. If any single omen that a plague could break out the next summer should come to your attention, set the time limit not farther than March, because when the air begins to get warm, diseases gain momentum accordingly. Act in the same manner if you fear a war could break out or some other misfortune because one month can prove to be immensely important. Be cautious and not a fool like those who schedule a payment to be made within 18 months, the period in which four popes could easily pass away. In case of such a deadline, it is impossible to insure yourself unless an excellent written contract has been signed, and to draw up such a contract which would not be distorted in the long run, is virtually impossible. Even if it were not, long periods are always inherently dangerous. Fourth, consider the quantity. T ry not to grant either larger credits, or smaller ones to a greater number of people. T ake into account your financial capacity as well as that of the person you are granting a credit. Do not consent to major credits under any terms. Fifth, calculate the profit i.e. increase the price of your merchandise fairly and sensibly for if you burden a poor man too heavily, you might lose both capital and profit. Moderation is necessary when you are selling and the mention of this will be

made in the chapter dealing with the question of conscience. Sixth, pay attention to the method of payment. When you sell your goods on credit, the contract should be drawn up in a clear and official form in an authorized office or by a public notary or in any way that is common and acceptable in the county of your current dwelling because public contracts and private-legal documents are written in accordance with regional customs. If for any reason you cannot take the necessary precautions by means of an official document, find reliable witnesses and rely on them. Do not refrain yourself from requiring a written bond even from friends and relatives, because the closer the relation, the more cautious you need to be. An old saying warns: “Negotiate with the enemy, and guard against your friend.” After all, it is your prerogative to insist on a document when trusting someone with your merchandise. Remember this as well: if you notice a debtor is poorly running a business, do not impose your demands on him if you think his circumstances might be thus disclosed. If you were to harm his reputation in this way, he would lose his credits and consequently you as well would be in danger of losing the assets he owes you. If need be, you can choose to offer him further support and grant him additional credit; but be warned to take the strongest measures of precaution to avoid inflicting further damage. Y ou will be saved when he once again regains a good reputation as a financially sound trader. Be careful not to grant any credits to students, teachers or soldiers for their understanding of monetary issues and settling payments is inferior. Money is very alluring by nature, and when one abounds in it, it is such a

pleasing situation that it is impossible to give it up freely. T raders would also fall under this spell if they were not receiving and giving it to one another constantly and with no passion whatsoever, which eventually turns into a habit. As the Philosopher put it: “Common things do not generate any passion.” The opposite is true for those who are not used to it. If you are asked to grant him a credit for the merchandise he never handled or he is not a trader by vocation nor a man of honor, or you suspect that he intended to resell it recklessly, reject the request of such and similar kinds. If he fails, you fail as well, and to debit the surety after the deadline passes might lead to the loss of a substantial amount of the assets you offered on credit and even your own bankruptcy. In conclusion of this chapter, I advise you to avoid granting credits if at all possible even if the alternative is not feasible. Selling on credit is usually a policy of people who are not accomplished in trading or lack either talent or experience.