If the customer obtains a loan without security they obtain money-capital. He should have added that it does not matter whether they use it as such, or to fund consumption. It has been advanced as money-capital, by the bank, and they charge interest on that basis.
If the customer obtains a loan, but hands over various forms of security, however, this is not an advance of capital. They already possessed an equivalent amount of capital, in these securities. What they have done is temporarily exchanged possession of capital in one form, for possession of capital in another, in order to obtain liquidity. In other words, they have exchanged capital in an illiquid form for capital in a liquid form. They have not been advanced capital, but only money, on condition that they repay it at some future date, at which time their illiquid capital is returned to them.
“He does not enter into the transaction because he needs capital — he has that in his securities — but because he needs money. Here we, therefore, have an advance of money, not of capital.” (p 428)
In terms of discounting bills it is not an advance of any sort, but simply a matter of buying and selling. The bill is not provided as security, but is essentially sold to the bank in exchange for an amount of money.
“There is no question of any return payment on his part. If the client buys hard cash with a bill of exchange or some similar instrument of credit, it is no more and no less an advance than were he to buy cash money with his other commodities, such as cotton, iron, or corn. Still less can this be called an advance of capital. Every purchase and sale between one merchant and another is a transfer of capital.” (p 429)
Engels comments,
“And since least of all Mr. Loyd-Overstone ever advanced his funds without collateral except on the rarest occasions (he was the banker of my firm in Manchester), it is likewise evident that his lyric descriptions of the great quantities of capital loaned by generous bankers to manufacturers in need of capital are gross inventions.” (p 429)
Engels quotes Marx’s later comments to corroborate this view.
“By the way, in Chapter XXXII Marx says essentially the same thing: "The demand for means of payment is a mere demand for convertibility into money,so far as merchants and producers have good securities to offer; it is a demand for money-capital whenever there is no collateral, so that an advance of means of payment gives them not only the form of money but also the equivalent they lack, whatever its form, with which to make payment." — And again in Chapter XXXIII: "Under a developed system of credit, with the money concentrated in the hands of bankers, it is they, at least nominally, who advance it. This advance refers only to money in circulation. It is an advance of circulation, not an advance of capitals which it circulates."” (p 429)
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