The world runs on money, regardless of what form it comes in. Gold, cash, or credit. Credit is particularly important because it helps an organization bridge between cash cycles.

Why?

If economic downturns or inflationary pressures arise quickly, then credit will also tighten.

Impact Potential

If the organization, or its suppliers, needs credit to produce and distribute the goods for sale, the lack of interim credit could lead to reduced inventories and sales and even bankruptcies.

Major Challenges/Risks

Economic Market Prediction:
Predicting whether the economy is going to grow, stay flat, or recess (or depress) is the first challenge, as that’s a leading indicator of credit markets.

Credit Market Prediction:
Based on the projected economic changes, predicting the base and prime rate changes, availability of credit, and the future cost to your organization and your primary suppliers.

Alternative Credit Sources:
If your primary sources are projected to become considerably more expensive or restrict credit access, can you identify alternate sources? Moreover, how much will those cost, how long to establish the relationships, and how reliable will they be?

Alternative Credit Arrangements:
If right now you are just using loans or lines of credit, maybe you need to consider early payment discounts, invoice factoring, or alternative supply chain based credit arrangements.

Final Words

Credit conditions depend heavily on economic conditions, so this is yet another reason you need a good economist.