Barter Fits the Bill for Strapped Firms

I worked for a fellow that belonged to a barter association back in the 1970s, but have heard little about bartering since. One thing I recall is that governments regard barter transactions as taxable sales. The WSJ Online reports that small businesses are bartering again:

As small businesses find it impossible to borrow money and customers are slower to pay bills, the barter economy is becoming a crucial way for many companies to find the cash they need to keep operating.
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Atlanta Refrigeration Service Co. worked out a deal with a local sandwich shop that was 90 days overdue on a $1,500 bill: The sandwich shop paid $500 and agreed to cater lunch to Atlanta Refrigeration’s office five times over the next six months.
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Typically, a small business sets up an account at a barter company, similar to a checking account at a bank, for a one-time fee. “Trade dollars” earned for services rendered are deposited into the account and can be spent on any product or service in the network. Companies regularly find others willing to barter via the barter site’s online directory of services, email newsletters, referrals or by contacting a firm’s account manager.

On top of the setup fee, both parties pay the barter company a transaction fee of about 5% to 6% on each deal.

In 2008, about 250,000 North American companies conducted barter transactions worth more than $16 billion, according to the International Reciprocal Trade Association, a nonprofit based in Portsmouth, Va., that regulates and provides standards for modern trade and barter-service companies. The amount for small businesses climbed to an estimated $11 billion last year from $10 billion in 2007. David Wallach, the association’s president, says if the trend continues he expects a 15% gain this year to about $12.7 billion.
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“It doesn’t always work,” says Mr. Weiss, who is a member of two barter companies and saved his company $10,000 worth of barter transactions in 2008, including flower purchases and theater tickets. “And even if it does work, you must be willing to invest the time.”