This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Comparative Operating Experience of Consumer Instalment Financing Agencies and Commercial Banks, 1929-41 Volume Author/Editor: Ernst A. Dauer Volume Publisher: NBER Volume ISBN: 0-870-14126-0 Volume URL: Publication Date: 1944 Chapter Title: Sources of Funds Chapter Author: Ernst A. Dauer Chapter URL: Chapter pages in book: (p. 38 - 54)


of Funds

IN ANY business enterprise the sources of funds depend on the rela-

tive ease with which funds of different types are obtainable, and this in turn is affected by the character of the company's assets, the seasonal and cyclical fluctuations in its volume of business, its rapidity of growth, its demonstrated or anticipated stability of
profits and continuity of operations, its size, and any other aspect of

its operations which affects its position as a potential borrower. These factors also determine its financial policy, causing the management to choose one source of financing rather than another.

the high proportion, relative to other credit institutions, of funds obtained through use of equity capital. However, during the period 1929-1941 these agencies attained flexibility in the sources of their funds through the increased use of borrowed money, chiefly shortterm borrowings.' They were, in general, able to adjust the volume of funds to the demand for accommodation, increasing borrowings when demand arose and paying them off when demand declined. In effect, these consumer instalment financing agencies secured funds at wholesale from other financial institutions, chiefly banks, and retailed the proceeds to consumers. Over the period 1929-41, the sources of funds of the consumer instalment financing agencies give evidence of their progress toward maturity. The chief change was a gradual lowering of the proportion...