RESTRICTED ADVANCES.

Kaipara and Waitemata Echo, 1 July 1920, Page 3

RESTRICTED ADVANCES.

ANNOUNCED BY BANKS

The president of the National Dairy Association announced last week that the associated banks had decided that in case of dairy factories requiring finance to start newenterprises they must provide 25 per cent, of the money required before being granted advances. Capital must be subscribed to the extent of at. least two-thirds of the advance asked for, and in the same ratio should the shares be increased, .Depreciation must be written off each year to the extent of at least the amount permitted by the In-come-tax Department. , The amount so written- off must be applied to a permanent reduction of the overdraft limit,-; As long as a company is indebted to a bank at least Id per lb.;on butterfat supplied must ,be withheld from distribution. The amount must be either applied to the payment of the suppliers' liability and written off the company's assets or be credited to the reserve fund. Thus, if one farthing per lb. is held back monthly from milk money and credited to suppliers' share accounts, three farthings is to be held back before the payment of a bonus. All advances must be secured by the joint and by several guarantees of the suppliers and by the security of all the assets of the company.

Existing companies reconstructing or financing most observe similar conditions.

The chairman said this tightening up was going to have a deleterious effect the industry, especially regarding the development of backblock factories.