Criticism of the bank lending options available for small businesses has become one of the most prevailing topics of conversion in the SME sector. This has lead to the increasing popularity of alternative finance measures, including invoice finance and crowd funding, but has also lead to more unusual means of trading emerging. One of the most intriguing is Bartercard, a system set up 12 years ago to help firms in the UK exhancge goods and services without going near their cheque books.
The system works by letting businesses buy or sell goods or services to other businesses using their Bartercard credit card. In return, their accounts will be debited or credited with the equivalent amount of ‘trade pounds’. Everything is worth what it would have been on the open market, so everyone gets the right value for their products.
Worldwide, the bartering industry is worth nearly £8bn a year. The Corporation of London is also looking to set up its own ‘capacity exchange hub’ as a centralised barter system for the City.
The main advantage of using bartering systems is that it allows firms to use up spare capacity, keeping their costs down and helping with cash flow pressures. It can also increase customer reach, providing for those who they would not otherwise have access to without the Bartercard platform. There are fees to pay as well as a monthly registration, credit check and commission fee of 5.5%, but there is an interest free overdraft available allowing firms to start purchasing straight away.
In the UK, around 4,000 small and medium businesses are using the system, providing 10,000 different products and services. All sectors are included, from hotels and pubs to accountants and bouncy castle firms. Last year, the UK saw around 70,000 different trades being completed with a value of up to £40 million. Now, up to 500 new firms are joining every month. Though initially slow to take off in the UK, Bartercard could be exciting new opportunity for many small businesses.