Making Do Without Credit — A Strategy for Business Growth

As part of my participation in the law firm of Gallagher, Callahan & Gartrell, I often contribute to its monthly newsletter and other firm publications. This post provides the introduction to my most recent article. Given the current credit, I thought this article might be of general interest.

Making Do Without Credit — A Strategy for Business Growth

A guide to growing your business using credit alternatives including joint venture agreements, revenue sharing, and installment contracts

October 2008 will be remembered for years to come as the U.S. economic crisis redefines the commercial landscape. While many companies are facing pressure directly from their financial woes, many more are struggling to deal with the broader challenge presented to the credit markets. Potential home buyers with reasonably good credit are struggling to find mortgages, offsetting the opportunity created by falling real estate prices. Retail automobile sales have dropped to all-time lows as consumers await more fuel efficient vehicles and struggle to find credit.

For entrepreneurs and small business owners who provide non-luxury goods and services, the combination of tight credit and economic anxiety have made doing business as normal a thing of the past. In the absence of affordable credit, however, companies which provide counter-cyclical products should ride out the economic storm if they plan ahead.

The alternative to a fluid credit market harkens back to a commercial barter system. A good barter economy allows those who have excess products to trade those products with other producers that have excesses of other products. In the same way, for businesses struggling to grow, coordination of excess productivity may create new opportunities.

Alternatives to Credit: Joint Venture Agreements, Profit Participation Agreements, and Installment Contracts

Through joint venture agreements, profit participation agreements or installment contracts, companies can pull together to reduce part of their cash-flow burden and reduce the impact of poor credit markets.

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