The Complete English Tradesman (1839 ed.) by Daniel Defoe

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The reason of this case is as plain as the assertion; the cause is in
itself; no man lends his money but with an expectation of receiving it
again with the interest. If the borrower pays it punctually without
hesitations and defalcations, without difficulties, and, above all,
without compulsion, what is the consequence?--he is called an honest
man, he has the reputation of a punctual fair dealer. And what
then?--why, then, he may borrow again whenever he will, he may take up
money and goods, or anything, upon his bare words, or note; when another
man must give bondsmen, or _mainprize_, that is, a pawn or pledge for
security, and hardly be trusted to neither. This is credit.

It is not the quality of the person would give credit to his dealing;
not kings, princes, emperors, it is all one; nay, a private shopkeeper
shall borrow money much easier than a prince, if the credit of the
tradesman has the reputation of being an honest man. Not the crown
itself can give credit to the head that wears it, if once he that wears
it comes but to mortgage his honour in the matter of payment of money.

Who would have lent King Charles II. fifty pounds on the credit of his
word or bond, after the shutting up the Exchequer? The royal word was
made a jest of, and the character of the king was esteemed a fluttering
trifle, which no man would venture upon, much less venture his money
upon.

In King William's time the case was much the same at first; though the
king had not broken his credit then with any man, yet how did they break
their faith with the whole world, by the deficiency of the funds, the
giving high and ruinous interest to men almost as greedy as vultures,
the causing the government to pay great and extravagant rates for what
they bought, and great premiums for what they borrowed--these were the
injuries to the public for want of credit; nor was it in the power of
the whole nation to remedy it; on the contrary, they made it still grow
worse and worse, till, as above, the parliament recovered it. And how
was it done? Not but by the same method a private person must do the
same, namely, by doing justly, and fairly, and honestly, by every body.

Thus credit began to revive, and to enlarge itself again; and usury,
which had, as it were, eaten up mankind in business, declined, and so
things came to their right way again.

The case is the same with a tradesman; if he shuffles in payment,
bargains at one time, and pays at another, breaks his word and his
honour in the road of his business, he is gone; no man will take his
bills, no man will trust him.

The conclusion is open and clear: the tradesman cannot be too careful of
his credit, he cannot buy it too dear, or be too careful to preserve it:
it is in vain to maintain it by false and loose doing business; by
breaking faith, refusing to perform agreements, and such shuffling
things as those; the greatest monarch in Europe could not so preserve
his credit.

Nothing but probity will support credit; just, and fair, and honourable
dealings give credit, and nothing but the same just, and fair, and
honourable dealings will preserve it.

FOOTNOTES:

[42] [How strikingly was this proved in the last war, when the British
government obtained credit for no less than six hundred millions to
conduct warlike operations, and by these means was ultimately
victorious.]

[43] [The author's praises of credit must be received with caution. If
his descriptions of the credit system of his own day are true, an
improvement has since taken place, as business neither is nor can be now
carried on to such an extent upon credit--a circumstance that redounds
to the advantage of all parties.]

[44] [Defoe speaks of such cases as if there were something laudable in
them, whereas it is obviously for the interest of all honest traders,
that no such men should be allowed to carry on business.]

[45] [Defoe almost appears in this place to lay capital out of the
question, and to represent credit as all in all. Credit is a matter of
great consequence; but we must not attempt to carry on business by its
means alone. It should only be considered as an aid to capital. Those
who, without capital, endeavour to set up in business by means of
credit, or, when capital is exhausted, attempt to struggle on by means
of credit alone, will, in general, only have a life of anxiety and
dispeace for their pains.]

CHAPTER XXV

OF THE TRADESMAN'S PUNCTUAL PAYING HIS BILLS AND PROMISSORY NOTES UNDER
HIS HAND, AND THE CREDIT HE GAINS BY IT

As I said that credit is maintained by just and honourable dealing, so
that just dealing depends very much upon the tradesman's punctual
payment of money in all the several demands that are upon him. The
ordinary demands of money upon a tradesman are--

I. Promises of money for goods bought at time.

II. Bills drawn upon him; which, generally speaking, are from the
country, that is to say, from some places remote from where he lives.
Or,

III. Promissory notes under his hand, which are passed oftentimes upon
buying goods: bought also at time, as in the first head.

IV. Bonds bearing interest, given chiefly for money borrowed at running
interest.

1. Promises of money for goods bought at time. This indeed is the
loosest article in a tradesman's payments; and it is true that a
tradesman's credit is maintained upon the easiest terms in this case of
any other that belongs to trade; for in this case not one man in twenty
keeps to his time; and so easy are tradesmen to one another, that in
general it is not much expected, but he that pays tolerably well, and
without dunning, is a good man, and in credit; shall be trusted any
where, and keeps up a character in his business: sometimes he pays
sooner, sometimes later, and is accounted so good a customer, that
though he owes a great deal, yet he shall be trusted any where, and is
as lofty and touchy if his credit be called in question, as if he paid
all ready money.

And, indeed, these men shall often buy their goods as cheap upon the
credit of their ordinary pay, as another man shall that brings his money
in his hand; and it is reasonable it should be so, for the ready-money
man comes and buys a parcel here and a parcel there, and comes but
seldom, but the other comes every day, that is to say, as often as he
wants goods, buys considerably, perhaps deals for two or three thousand
pounds a-year with you, and the like, and pays currently too. Such a
customer ought indeed to be sold as cheap to, as the other chance
customer for his ready money. In this manner of trade, I say, credit is
maintained upon the easiest terms of any other, and yet here the
tradesman must have a great care to keep it up too; for though it be the
easiest article to keep up credit in, yet even in this article the
tradesman may lose his credit, and then he is undone at once; and this
is by growing (what in the language of trade is called) long-winded,
putting off and putting off continually, till he will bear dunning; then
his credit falls, his dealer that trusted him perhaps a thousand pounds
previously, that esteemed him as good as ready money, now grows sick of
him, declines him, cares not whether he deals with him or no, and at
last refuses to trust him any longer. Then his credit is quite sunk and
gone, and in a little after that his trade is ruined and the tradesman
too; for he must be a very extraordinary tradesman that can open his
shop after he has outlived his credit: let him look which way he will,
all is lost, nobody cares to deal with him, and, which is still worse,
nobody will trust him.

2. Bills drawn upon him from the country, that is to say, from some
places remote from where he now dwells: it is but a little while ago
since those bills were the loosest things in trade, for as they could
not be protested, so they would not (in all their heats) always sue for
them, but rather return them to the person from whom they received them.

In the meantime, let the occasion be what it will, the tradesman ought
on all occasions to pay these notes without a public recalling and
returning them, and without hesitation of any kind whatsoever. He that
lets his bills lie long unpaid, must not expect to keep his credit much
after them.

Besides, the late law for noting and protesting inland bills, alters the
case very much. Bills now accepted, are protested in form, and, if not
punctually paid, are either returned immediately, or the person on whom
they are drawn is liable to be sued at law; either of which is at best a
blow to the credit of the acceptor.

A tradesman may, without hurt to his reputation, refuse to accept a
bill, for then, when the notary comes he gives his reasons, namely, that
he refuses to accept the bill for want of advice, or for want of effects
in his hands for account of the drawer, or that he has not given orders
to draw upon him; in all which cases the non-acceptance touches the
credit of the drawer; for in trade it is always esteemed a dishonourable
thing to draw upon any man that has not effects in his hands to answer
the bill; or to draw without order, or to draw and not give advice of
it; because it looks like a forwardness to take the remitter's money
without giving him a sufficient demand for it, where he expects and
ought to have it.

A tradesman comes to me in London, and desires me to give him a bill
payable at Bristol, for he is going to the fair there, and being to buy
goods there, he wants money at Bristol to pay for them. If I give him a
bill, he pays me down the money upon receipt of it, depending upon my
credit for the acceptance of the bill. If I draw this bill where I have
no reason to draw it, where I have no demand, or no effects to answer
it, or if I give my correspondent no advice of it, I abuse the remitter,
that is, the man whose money I take, and this reflects upon my credit
that am the drawer, and the next time this tradesman wants money at
Bristol fair, he will not come to me. 'No,' says he, 'his last bills
were not accepted.' Or, if he does come to me, then he demands that he
should not pay his money till he has advice that my bills are accepted.

But, on the other hand, if bills are right drawn, and advice duly given,
and the person has effects in his hands, then, if he refuses the bill,
he says to the notary he does not accept the bill, but gives no reason
for it, only that he says absolutely, 'I will not accept it--you may
take that for an answer;' or he adds, 'I refuse to accept it, for
reasons best known to myself.' This is sometimes done, but this does not
leave the person's credit who refuses, so clear as the other, though
perhaps it may not so directly reflect upon him; but it leaves the case
a little dubious and uncertain, and men will be apt to write back to the
person who sent the bill to inquire what the drawer says to it, and what
account he gives, or what character he has upon his tongue for the
person drawn upon.

As the punctual paying of bills when accepted, is a main article in the
credit of the acceptor, so a tradesman should be very cautious in
permitting men to draw upon him where he has not effects, or does not
give order; for though, as I said, it ought not to affect his reputation
not to accept a bill where it ought not to be drawn, yet a tradesman
that is nice of his own character does not love to be always or often
refusing to accept bills, or to have bills drawn upon him where he has
no reason to accept them, and therefore he will be very positive in
forbidding such drawing; and if, notwithstanding that, the importunities
of the country tradesman oblige him to draw, the person drawn upon will
give smart and rough answers to such bills; as particularly, 'I refuse
to accept this bill, because I have no effects of the drawer's to answer
it.' Or thus, 'I refuse to accept this bill, because I not only gave no
orders to draw, but gave positive orders not to draw.' Or thus, 'I
neither will accept this bill, nor any other this man shall draw;' and
the like. This thoroughly clears the credit of the acceptor, and
reflects grossly on the drawer.

And yet, I say, even in this case a tradesman does not care to be drawn
upon, and be obliged to see bills presented for acceptance, and for
payment, where he has given orders not to draw, and where he has no
effects to answer.

It is the great error of our country manufacturers, in many, if not in
most, parts of England at this time, that as soon as they can finish
their goods, they hurry them up to London to their factor, and as soon
as the goods are gone, immediately follow them with their bills for the
money, without waiting to hear whether the goods are come to a market,
are sold, or in demand, and whether they are likely to sell quickly or
not; thus they load the factor's warehouse with their goods before they
are wanted, and load the factor with their bills, before it is possible
that he can have gotten cash in his hand to pay them.

This is, first, a direct borrowing money of their factor; and it is
borrowing, as it were, whether the factor will lend or no, and sometimes
whether he can or no. The factor, if he be a man of money, and answers
their bills, fails not to make them pay for advancing; or sells the
goods to loss to answer the bills, which is making them pay dear for the
loan; or refuses their bills, and so baulks both their business and
their credit.

But if the factor, willing to oblige his employers, and knowing he shall
otherwise lose their commission, accepts the bills on the credit of the
goods, and then, not being able to sell the goods in time, is also made
unable to pay the bills when due--this reflects upon his credit, though
the fault is indeed in the drawer whose effects are not come in; and
this has ruined many an honest factor.

First, it has hurt him by drawing large sums out of his cash, for the
supply of the needy manufacturer, who is his employer, and has thereby
made him unable to pay his other bills currently, even of such men's
drafts who had perhaps good reason to draw.

Secondly, it keeps the factor always bare of money, and wounds his
reputation, so that he pays those very bills with discredit, which in
justice to himself he ought not to pay at all, and the borrower has the
money, at the expense of the credit of the lender; whereas, indeed, the
reproach ought to be to him that borrows, not to him that lends--to him
that draws where there are no effects to warrant his draft, not to him
that pays where he does not owe.

But the damage lies on the circumstances of accepting the bill, for the
factor lends his employer the money the hour he accepts the bill, and
the blow to his credit is for not paying when accepted. When the bill is
accepted, the acceptor is debtor to the person to whom the bill is
payable, or in his right to every indorser; for a bill of exchange is in
this case different from a bond, namely, that the right of action is
transferable by indorsement, and every indorser has a right to sue the
acceptor in his own name, and can transfer that right to another;
whereas in a bond, though it be given to me by assignment, I must sue in
the name of the first person to whom the bond is payable, and he may at
any time discharge the bond, notwithstanding my assignment.

Tradesmen, then, especially such as are factors,[46] are unaccountably
to blame to accept bills for their employers before their goods are
sold, and the money received, or within reach: if the employers cannot
wait, the reproach should lie on them, not on the factor; and, indeed,
the manufacturers all over England are greatly wrong in that part of
their business; for, not considering the difference between a time of
demand and a time of glut, a quick or a dead market, they go on in the
same course of making, and, without slackening their hands as to
quantity, crowd up their goods, as if it were enough to them that the
factor had them, and that they were to be reckoned as sold when they
were in his hands: but would the factor truly represent to them the
state of the market--that there are great quantities of goods in hand
unsold, and no present demand, desiring them to slack their hands a
little in making; and at the same time back their directions in a plain
and positive way, though with respect too, by telling them they could
accept no more bills till the goods were sold. This would bring the
trade into a better regulation, and the makers would stop their hands
when the market stopped; and when the merchant ceased to buy, the
manufacturers would cease to make, and, consequently, would not crowd or
clog the market with goods, or wrong their factors with bills.

But this would require a large discourse, and the manufacturers'
objections should be answered, namely, that they cannot stop, that they
have their particular sets of workmen and spinners, whom they are
obliged to keep employed, or, if they should dismiss them, they could
not have them again when a demand for goods came, and the markets
revived, and that, besides, the poor would starve.

These objections are easy to be answered, though that is not my present
business; but thus far it is to my purpose--it is the factor's business
to keep himself within compass: if the goods cannot be sold, the maker
must stay till they can; if the poor must be employed, the manufacturer
is right to keep them at work if he can; but if he cannot, without
oppressing the factor, then he makes the factor employ them, not
himself; and I do not see the factor has any obligation upon him to
consider the spinners and weavers, especially not at the expense of his
own credit, and his family's safety.

Upon the whole, all tradesmen that trade thus, whether by commission
from the country, or upon their own accounts, should make it the
standing order of their business not to suffer themselves to be
overdrawn by their employers, so as to straiten themselves in their
cash, and make them unable to pay their bills when accepted. It is also
to be observed, that when a tradesman once comes to suffer himself to be
thus overdrawn, and sinks his credit in kindness to his employer, he
buys his employment so dear as all his employer can do for him can never
repay the price.

And even while he is thus serving his employer, he more and more wounds
himself; for suppose he does (with difficulty) raise money, and, after
some dunning, does pay the bills, yet he loses in the very doing it, for
he never pays them with credit, but suffers in reputation by every day's
delay. In a word, a tradesman that buys upon credit, that is to say, in
a course of credit, such as I have described before, may let the
merchant or the warehouse-keeper call two or three times, and may put
him off without much damage to his credit; and if he makes them stay one
time, he makes it up again another, and recovers in one good payment
what he lost in two or three bad ones.

But in bills of exchange or promissory notes, it is quite another thing;
and he that values his reputation in trade should never let a bill come
twice for payment, or a note under his hand stay a day after it is due,
that is to say, after the three days _of grace,_ as it is called. Those
three days, indeed, are granted to all bills of exchange, not by law,
but by the custom of trade: it is hard to tell how this custom
prevailed, or when it began, but it is one of those many instances which
may be given, where custom of trade is equal to an established law; and
it is so much a law now in itself, that no bill is protested now, till
those three days are expired; nor is a bill of exchange esteemed due
till the third day; no man offers to demand it, nor will any goldsmith,
or even the bank itself, pay a foreign bill sooner. But that by the way.

Bills of exchange being thus sacred in trade, and inland bills being (by
the late law for protesting them, and giving interest and damage upon
them) made, as near as can be, equally sacred, nothing can be of more
moment to a tradesman than to pay them always punctually and honourably.

Let no critic cavil at the word _honourably_, as it relates to trade:
punctual payment is the honour of trade, and there is a word always used
among merchants which justifies my using it in this place; and that is,
when a merchant draws a bill from abroad upon his friend at London, his
correspondent in London answering his letter, and approving his drawing
upon him, adds, that he shall be sure to _honour_ his bill when it
appears; that is to say, to accept it.

Likewise, when the drawer gives advice of his having drawn such a bill
upon him, he gives an account of the sum drawn, the name of the person
it is payable to, the time it is drawn at, that is, the time given for
payment, and he adds thus--'I doubt not your giving my bill due
honour;' that is, of accepting it, and paying it when it is due.

This term is also used in another case in foreign trade only, namely--a
merchant abroad (say it be at Lisbon, or Bourdeaux) draws a bill of L300
sterling upon his correspondent at London: the correspondent happens to
be dead, or is broke, or by some other accident the bill is not
accepted; another merchant on the Exchange hearing of it, and knowing,
and perhaps corresponding with, the merchant abroad who drew the bill,
and loth his credit should suffer by the bill going back protested,
accepts it, and pays it for him. This is called accepting it for the
honour of the drawer; and he writes so upon the bill when he accepts it,
which entitles him to re-draw the same with interest upon the drawer in
Lisbon or Bourdeaux, as above.

This is, indeed, a case peculiar to foreign commerce, and is not often
practised in home trade, and among shopkeepers, though sometimes I have
known it practised here too: but I name it on two accounts, first--to
legitimate the word honourable, which I had used, and which has its due
propriety in matters of trade, though not in the same acceptation as it
generally receives in common affairs; and, secondly, to let the
tradesman see how deeply the honour, that is, the credit of trade, is
concerned in the punctual payment of bills of exchange, and the like of
promissory notes; for in point of credit there is no difference, though
in matter of form there is.

There are a great many variations in the drawing bills from foreign
countries, according as the customs and usages of merchants direct, and
according as the coins and rates of exchange differ, and according as
the same terms are differently understood in several places; as the word
_usance_, and _two usance,_ which is a term for the number of days given
for payment, after the date of the bill; and though this is a thing
particularly relating to merchants, and to foreign commerce, yet as the
nature of bills of exchange is pretty general, and that sometimes an
inland tradesman, especially in seaport towns, may be obliged to take
foreign accepted bills in payment for their goods; or if they have money
to spare (as sometimes it is an inland tradesman's good luck to have),
may be asked to discount such bills--I say, on this account, and that
they may know the value of a foreign bill when they see it, and how far
it has to run, before it has to be demanded, I think it not foreign to
the case before me, to give them the following account:--

1. As to the times of payment of foreign bills of exchange, and the
terms of art ordinarily used by merchants in drawing, and expressed in
the said bills: the times of payment are, as above, either--

(1.) At sight; which is to be understood, not the day it is presented,
but three days (called days of grace) after the bill is accepted: (2.)
usance: (3.) two usance.[47]

Usance between London and all the towns in the States Generals'
dominions, and also in the provinces now called the Austrian Netherlands
[Belgium], is one month. And two usance is two months; reckoning not
from the acceptance of the bill, but from the date of it. Usance between
London and Hamburgh is two months, Venice is three months; and double
usance, or two usance, is double that time. Usance payable at Florence
or Leghorn, is two months; but from thence payable at London, usance is
three months. Usance from London to Rouen or Paris, is one month; but
they generally draw at a certain number of days, usually twenty-one
days' sight. Usance from London to Seville, is two months; as likewise
between London and Lisbon, and Oporto, to or from. Usance from Genoa to
Rome is payable at Rome ten days after sight. Usance between Antwerp and
Genoa, Naples or Messina, is two months, whether to or from. Usance from
Antwerp or Amsterdam, payable at Venice, is two months, payable in bank.

There are abundance of niceties in the accepting and paying of bills of
exchange, especially foreign bills, which I think needless to enter upon
here; but this I think I should not omit, namely--

That if a man pays a bill of exchange before it is due, though he had
accepted it, if the man to whom it was payable proves a bankrupt after
he has received the money, and yet before the bill becomes due, the
person who voluntarily paid the money before it was due, shall be liable
to pay it again to the remitter; for as the remitter delivered his money
to the drawer, in order to have it paid again to such person as he
should order, it is, and ought to be, in his power to divert the payment
by altering the bill, and make it payable to any other person whom he
thinks fit, during all the time between the acceptance and the day of
payment.

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