Lending 101

This is a great example of the importance of lending and why this economic rut is relying on reopening lines of credit for consumers and business owners. Although basic, borrowing is an essential resource to maintaining inventory, funding payroll and investing in growth opportunities.

It is August. In a small town on the South Coast of France, holiday season is in full swing, but it is raining so there is not too much business happening. Everyone is heavily in debt.

Luckily, a rich Russian tourist arrives in the foyer of the small local hotel. He asks for a room and puts a 100 Euro note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.

The hotel owner takes the banknote in hurry and rushes to his meat supplier to whom he owes €100.

The butcher takes the money and races to his wholesale supplier to pay his debt.

The wholesaler rushes to the farmer to pay €100 for pigs he purchased some time ago.

The farmer triumphantly gives the €100 note to a local prostitute who gave him her services on credit.

The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients, and lays the €100 on the counter.

At that moment, the rich Russian is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory and takes his €100 back and departs.

There was no profit or income. But everyone no longer has any debt and the small town people look optimistically towards their future.