On the other hand he that entrusts his money to a merchant or craftsman so as to form a kind of society, does not transfer the ownership of his money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand as something belonging to him, part of the profits derived from his money. [emphasis mine]
- St Thomas Aquinas Summa Theologica Secunda, Secunda Q78 A3
One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle, but is spent usefully, either to increase one’s fortune, to purchase new estates, or to engage in business transactions.
- Pope Benedict XIV Vix Pervenit - On Usury and Other Dishonest Profits
The fifth post on Usury, having looked at the infertility of money, some of the consequences that can have on favors, friendships, and home loans, we now turn to business loans.
An admittedly brief history, that more studied or scholars may refute.
The Catholic Church has, dogmatically, always held Usury to be sinful.
In practice, it has looked the other way at various times. I’ve heard the Crusades, various kings, etc.
The real turning point, to my knowledge, was the age of seafaring trade (think the East India Company) when the School of Salamanca rationalized away the provisions against interest due to piracy and dishonest borrowers becoming pirates themselves.
In essence, what they said was that banks and lenders didn’t have to do due diligence on the character and virtue of the whole operation to whom they were lending, but held only the business owner accountable to the character of his employees.
Thus, making him personally accountable, liable for the interest, and saying that money is unnaturally fecund. The amount of money involved incentivized people to disbelieve their lying eyes, and all fell in line with the banks.
Ever since, the West has accepted that point of view in total.
But, according to St Thomas, none of that is acceptable.
All business loans, every single one, can only be paid out either to the amount loaned, or as a sort of ownership on the business / venture - to be paid out of profits.
Thus, money put forward on a particular voyage to India for spices, gets paid out of the profits for that particular voyage, if that is what is negotiated. Or you could negotiate ownership of the company, and get paid out a percentage of all future voyages.
That, my friends, is how business loans are supposed to work.
Either you have excess wealth that you use as charity to invest within your community,
Or you invest in a particular venture you care about,
Or a complete business you think is going to do well for a length of time.
Again, as Aquinas notes - you can have an agent do this for you. It is acceptable that you may be a bad investor, and not wise with money. It is still your money to lose, not his nor the businesses.
It is your skin in the game.
Your game to lose.
Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business. From these types of contracts honest gain may be made.
- Pope Benedict XIV Vix Pervenit - On Usury and Other Dishonest Profits