by arnohesse.

By Arno Hesse

Can communities empower themselves with a Line of Credit?

I’m looking forward to this day: I shop for food in my community, grab lunch, pick up cheese for a party, and go out for dinner – and I don’t take my wallet out to pay – because my community already has my money, to work with. Let’s make that day happen soon.

balances.288Actually, a glimpse of that day is already here. Often, I don’t pay for my food, because I already paid for it. Its producers already have my money. In the morning, on my way to the office, I pick up a fresh-pressed juice from Sow. Gives me more kick than a latte.  For lunch, I may get a sandwich at La Fromagerie near our office. If it’s a special day, I may have a dinner or birthday party at the Hillside Supper Club. On the weekend, at the farmers market, I may pick up Saint Benoit’s amazing yogurt and the kick-ass sauerkraut from Farmhouse Culture.

In all of these situations, I’m not taking out my wallet. No cash. No card. These businesses already have my money, several hundred dollars each. And now have store credits with them and pay with my name and face. In a way, we have taken our relationship to the next level.

Weirauch Sheep

The sheep of Weirauch Farm have cost,
long before the cheese sells.

Why do I think it’s a good idea that businesses in my community have a good chunk of my money?  Well, good food takes care time to grow before it gets to my table. The producer needs to pre-finance my food.

  • Buy seeds or livestock to grow
  • Pay for labor and equipment to get to prepare the grounds
  • Purchase ingredients for manufacturing for cooking, brewing, fermenting, curing, or fermenting a product.

The suppliers typically need to be paid before the revenues from the sales come in. Bridging the time lag in cash flow between expenses and revenues is commonly known as Working Capital. It keeps the business operating. If the business is growing, even more expenses need to be pre-financed. Established companies can dip in their cash reserves or a bank’s Line of Credit. Small, growing companies often don’t have access to such sources. Here’s where the customer’s wallet comes in.

By paying it forward, I’m feeding the system that I want to feed me.

If we care about the livelihood of the businesses in my local food system, it makes sense to pay for our local food in advance. “Edible credits” can be a community’s line of credit. By prepaying purchases, the customers give their favorite businesses essentially a loan.

Credibles receipts

Heather just received a loan payment. She drank it.

Different from a bank loan, the business pays the customer back with their products or services. These are repayments, they can grow, cook, bake, or process, at cost of goods sold. Imagine a bank who’d happily take a load of empanadas as a monthly loan payment …

Thankfully, the discussion about Community Capital is picking up. Often, it is thought of investment capital, to get a business started, or for capital expenditures. It’s time to expand the perspective to the Community Working Capital that keep community businesses thriving. With a vehicle like Credibles, a community can empower itself to sustain the businesses it wants for sustenance.

Community Working Capital is not charity or philanthropy. It is healthy self-interest to feed the producers I want to feed me. I want my community to have my money upfront. Instead of paying, I’d be eating my re-payments.

This post is in part derived from a talk at the National Gathering of Slow Money on April 29, 2013:

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