He that takes credit may give credit, but he must be exceedingly watchful; for it is the most dangerous state of life that a tradesman can live in, for he is in as much jeopardy as a seaman upon a lee-shore.
If the people he trusts fail, or fail but of a punctual compliance with him, he can never support his own credit, unless by the caution I am now giving; that is, to be very sure not to give so much credit as he takes.
By the word _so much_, I must be understood thus--either he must sell for shorter time than he takes, or in less quantity; the last is the safest, namely, that he should be sure not to trust out so much as he is trusted with.

If he has a real stock, indeed, besides the credit he takes, that, indeed, makes the case differ; and a man that can pay his own debts, whether other people pay him or no, that man is out of the question--he is past danger, and cannot be hurt; but if he trusts beyond the extent of his stock and credit, even _he_ may be overthrown too.
There were many sad examples of this in the time of the late war,[13] and in the days when the public credit was in a more precarious condition that it has been since--I say, sad examples, namely, when tradesmen in flourishing circumstances, and who had indeed good estates at bottom, and were in full credit themselves, trusted the public with too great sums; which, not coming in at the time expected, either by the deficiency of the funds given by parliament, and the parliament themselves not soon making good those deficiencies, or by other disasters of those times; I say, their money not coming in to answer their demands, they were ruined, at least their credit wounded, and some quite undone, who yet, had they been paid, could have paid all their own debts, and had good sums of money left.
Others, who had ability to afford it, were obliged to sell their tallies and orders at forty or fifty per cent.

loss; from whence proceeded that black trade of buying and selling navy and victualling bills and transport debts, by which the brokers and usurers got estates, and many thousands of tradesmen were brought to nothing; even those that stood it, lost great sums of money by selling their tallies: but credit cannot be bought too dear; and the throwing away one half to save the other, was much better than sinking under the burden; like sailors in a storm, who, to lighten the ship wallowing in the trough of the sea, will throw the choicest goods overboard, even to half the cargo, in order to keep the ship above water, and save their lives.
These were terrible examples of over-trading indeed; the men were tempted by the high price which the government gave for their goods, and which they were obliged to give, because of the badness of the public credit at that time; but this was not sufficient to make good the loss sustained in the sale of the tallies, so that even they that sold and were able to stand without ruin, were yet great sufferers, and had enough to do to keep up their credit.
This was the effect of giving over-much credit; for though it was the government itself which they trusted, yet neither could the government itself keep up the sinking credit of those whom it was indebted to; and, indeed, how should it, when it was not able to support its own credit?
But that by the way.

I return to the young tradesman, whom we are now speaking about.
It is his greatest prudence, therefore, after he has considered his own fund, and the stock he has to rest upon--I say, his next business is to take care of his credit, and, next to limiting his buying-liberty, let him be sure to limit his selling.

Could the tradesman buy all upon credit, and sell all for ready money, he might turn usurer, and put his own stock out to interest, or buy land with it, for he would have no occasion for one shilling of it; but since that is not expected, nor can be done, it is his business to act with prudence in both parts--I mean of taking and giving credit--and the best rule to be given him for it is, never to give so much credit as he takes, by at least one-third part.
By giving credit, I do not mean, that even all the goods which he buys upon credit, may not be sold upon credit; perhaps they are goods which are usually sold so, and no otherwise; but the alternative is before him thus--either he must not give so much credit in quantity of goods, or not so long credit in relation to time--for example: Suppose the young tradesman buys ten thousand pounds' value of goods on credit, and this ten thousand pounds are sold for eleven thousand pounds likewise on credit; if the time given be the same, the man is in a state of apparent destruction, and it is a hundred to one but he is blown up: perhaps he owes the ten thousand pounds to twenty men, perhaps the eleven thousand pounds is owing to him by two hundred men--it is scarce possible that these two hundred petty customers of his, should all so punctually comply with their payments as to enable him to comply with his; and if two or three thousand pounds fall short, the poor tradesman, unless he has a fund to support the deficiency, must be undone.
But if the man had bought ten thousand pounds at six or eight months' credit, and had sold them all again as above to his two hundred customers, at three months' and four months' credit, then it might be supposed all, or the greatest part of them, would have paid time enough to make his payments good; if not, all would be lost still.
But, on the other hand, suppose he had sold but three thousand pounds' worth of the ten for ready money, and had sold the rest for six months' credit, it might be supposed that the three thousand pounds in cash, and what else the two hundred debtors might pay in time, might stop the months of the tradesman's creditors till the difference might be made good.
So easy a thing is it for a tradesman to lose his credit in trade, and so hard is it, once upon such a blow, to retrieve it again.