An overview by a barter-credit organization's CEO of how bartering offers an alternative to traditional loans.
Here's an alternative to hitting up the bank for credit: turn to your local barter network. Let's say you need working capital to purchase services essential to your company's stability. "Applying for a barter credit line is different from applying to a bank," says Douglas Dagenais, vice-president of Barter Corp. in Oakbrook Terrace, Ill., a network of about 3,000 member businesses. "We will consider a company's production capacity -- what it can pay into our network -- and how well we'll be able to market those items to our members."
A credit line, offered by a growing number of barter exchanges, is basically an extension of barter credits, which allow a business to buy essential items from other network members before selling its own goods into the system. "One of our customers owns a roofing business, which means he can perform his work only during the warm months," says Dagenais. "But he uses our credit line first during the winter to fix his trucks and get his advertising campaign ready."
If you apply, expect barter companies to check your Dun & Bradstreet credit rating and vendor references, although the application and approval process should be easier than with a bank loan; on credit lines worth more than $10,000, owners may also have to sign personal guarantees. Although you'll pay interest on purchases you make with your credit line, you'll be able to pay back interest and principal with bartered goods rather than precious cash.