By Warren Wise
Post and Courier – Charleston

Wayne Lee sees a chiropractor every week, but he’s found a way to pay for it without breaking his back or his bank account.

The owner of Complete Music and Video in Mount Pleasant estimates he saves about $2,000 a year just for his back through bartering, an age-old system of trading goods and services without money that is growing in popularity as the stingy economy makes cash more scarce.

If he needs his teeth cleaned or a crown installed, he barters for it with his dentist, also a barter member. Pressure washing his house? Getting the carpet cleaned? Same deal. He trades it out as a member of Barter Brokers International, a Mount Pleasant-based company with 600 members throughout North Carolina and South Carolina whose trade is up in a down economy.

A struggling economy is a barterer’s best friend, and right now business is booming, said Ron Whitney, executive director of the International Reciprocal Trade Association that is connected to about 350 barter groups worldwide.

“Due to the down economy, the modern trade-and-barter industry is capturing an enormous amount of business,” Whitney said. “Businesses are looking for alternative marketplaces to make up for the loss of revenue they are experiencing due to the economy.”

He added that barter groups “are tailor-made, pre-existing networks ready to

provide more business for businesses.”

In the past 12 months, most of the Portsmouth, Va.-based trade association’s members have reported transaction spikes in deals and new members from 15 percent to 35 percent, Whitney said.

Barter banks

A barter group acts not only as a trade expediter, but also like a bank. It is a third-party record keeper.

And while bartering doesn’t involve cash, it cannot escape the Internal Revenue Service. Members have to report earnings, just like anyone else, to the IRS.

For example, Whitney said a landscaper can have $18,000 in barter sales that is considered taxable income. If that same landscaper has a similar amount of barter buys, that could be an offsetting deduction.

“If managed correctly, they won’t get into a situation of tax liability,” Whitney said.

Firms such as Barter Brokers International keep up with the flurry of transactions for bookkeeping purposes and provide clients with the information they need to report to tax authorities.

“The government and IRS look at us just like a bank,” said Bill Bailey, who founded Barter Brokers International about 15 years ago. “We are our own currency. Because of the recession, people aren’t spending cash. They are looking for alternative ways to survive.”

Bailey said his business couldn’t be better.

“Sales have doubled,” Bailey said of market conditions during the past year. “We thrive in these economies. We are picking up new clients right and left now.”

Exchange rate

Bailey’s company works with about 250 other exchanges around the world, so business is not just confined to members in the Carolinas.

While membership fees and terms vary from one barter exchange to another, it costs a business a onetime fee of $595 to join Bailey’s barter group plus a 6.75 percent monthly transaction fee on total sales and purchases. Members are assigned a broker who connects them to a vendor for a product or service they need.

Transactions require a plastic card and an authorization number requested by the seller for deals over $75. And the system works with credits instead of cash.

For instance, if Lee’s Complete Music and Video provides services for another member, his account receives a credit, or a certain amount of barter dollars, for the value of the job. If he gets his carpet cleaned by another member, his account is charged for the work.

“You don’t have to do it one on one,” Lee said. “That’s what makes it good.”

He not only benefits through services he needs, but also wins new clients for his business.

“It gives us business that we ordinarily wouldn’t get,” Lee said.

Lee handles up to 350 events a year by providing music and video services for parties, weddings and corporate functions, but he saw a 15 percent decline in business last year. About half of his sales comes from weddings, and while he’s still busy, he is glad he’s part of the bartering group.

“It’s worth it to me,” he said. “I come out with more business than what I would have normally.”

Dr. Ted Melchers, a Mount Pleasant dentist, signed on to the Bailey’s barter system about 15 years ago to steer patients to his practice. He now uses his barter dollars mainly for family vacations or to acquire new fly-fishing rods, but he’s also used them for home improvements such as new cabinets, painting, and a heating and air-conditioning system.

“I usually save it for things I wouldn’t spend money on with my budget,” Melchers said. “It’s not a huge part of my practice, probably less than 5 percent. I try to limit it somewhat. I can’t handle a whole office full of barter. If I want to do something, I will call the Baileys and they will direct more patients my way.”

Bill Bailey, of Barter Brokers International in Mount Pleasant, has seen business pick up in the slowing down economy. Successful swap The University of Illinois Extension offers these recommendations for successful bartering.

–Know who will supply needed materials. Usually it is the receiver; but the provider, in some cases, may have the needed tools. When materials must be purchased, work together to determine specifics, cost limits, quality of materials, deadlines and other details that could become irritants.

–Assume nothing. Be sure to agree on the details of exactly what will be done. Be sure expectations are clear to all. In some cases, a contract or written agreement might be a good idea.

J. Ted Melchers, a dentist in Mount Pleasant has been working with Barter Brokers International for 15 years and trades his dentistry services for other goods and services.

“Barter can help you leverage to get things you want, with what you have. All we are is a different currency” – BILL BAILEY PRESIDENT OF CHARLESTON-BASED BARTER BROKERS

For more information on barter for your business call: 1-800-200-5531 or visit. www.barterbrokers.com

By Jim Morrill
The Charlotte Observer

Short on cash, some businesses are turning to the barter system as an alternative to the dollar.

Paula Chapman has seen the economy take its toll on the printing business she and her husband run out of their south Charlotte home. But that hasn’t stopped them from dining out or even splurging on expensive filet mignons as holiday gifts.

Why? Because they barter.

“The cash business has been really, really slow,” says Chapman, 56, who belongs to two barter exchanges. “So it’s trade that has kept us at least working – and our brains functioning.”

As the economy continues to sink, more people like Chapman are turning to bartering to keep themselves or their businesses afloat. Chapman, for example, barters printing services for everything from meals to eyeglasses. Networks of all sizes report spikes in interest as cash and credit become increasingly scarce.

“People who didn’t give us the time of day in years past are opening their door now,” says Bill Bailey, president of the Charleston-based Barter Brokers International, one of many for-profit exchanges.

“When the economy’s doing well and people are slammed with cash, they don’t need us. All we are is a different currency.”

In recent months, Bailey has seen business double at his company. With more than 600 Carolinas’ clients, it’s one of the region’s largest barter networks. Other exchanges are smaller and less formal. Some cater to local communities. Some involve simple swaps between individuals.

And in an echo of the Great Depression, businesses in some Piedmont counties are even resurrecting a local paper currency. Pegged to the dollar, it’s designed to keep money in the community.

Wall Street’s troubles have created fertile ground for such alternatives.

The collapse of financial instruments known as commercial paper, which provided billions in short-term corporate financing, has forced big companies to turn for credit to banks, which then have little left for smaller businesses, says finance professor Campbell Harvey of Duke University’s Fuqua School of Business.

“The small and medium-sized businesses are being hammered right now,” Harvey says. “That means that it’s hard to get working capital … One thing you can do is barter. It’s a great idea and we’re going to see more of it because cash is scarce.”

Works as a sort of bank

Tim Goodwin of Raleigh was running out of cash in December. He’d spent most of what he had to buy a larger shop for his auto repair business. But the long-abandoned building needed a lot of work. So he dipped into credits he had with the Raleigh-based Barter Business Exchange.

The credits paid for the plumbers, painters, electricians, exterminators, contractors and sign makers that allowed him to open Goodwin Automotive in January.

“If it wasn’t for that income stream, there’s no way in the world I would have made it,” says Goodwin, 35. “We never missed a beat.”

Like similar brokers, the Barter Business Exchange works as a sort of bank.

While fees vary from one exchange to another, Barter Business members pay a $500 joining fee and small monthly charges in addition to a 10 percent cash fee on each transaction. When they trade a service – such as Goodwin’s auto repair – “barter dollars” go into their computerized account.

When they want to trade for something themselves, their account is debited. The “dollars” transfer as credits to the member who provides the goods or services.

“Think of it as a prepaid Visa card within certain member businesses,” says Maurya Lane, owner of Barter Business Exchange, which has around 700 members.

Companies like Lane’s act as a third-party bookkeeper. Because many brokers have reciprocal agreements, members can trade credits across the country and around the world.

“The beauty is when you’re involved with one you really have access to all,” says Lou Amico, 53, president of the Lake Norman-based L.A. Management Co., a marketing firm whose services include video production and Web design.

Amico has traded for an office copier, home furnishings, a laptop and jewelry. He even took five clients on a four-day outing to Fripp Island last fall – all on barter.

There’s little that can’t be bartered, says Ron Whitney, executive director of the Virginia-based International Reciprocal Trade Association. He’s working on a deal involving a half-million- dollar modular home.

One party that doesn’t barter is the Internal Revenue Service. It treats the market value of goods and services received in trade as income. Get $3,000 worth of office supplies in a swap through an exchange, for example, add $3,000 to your taxable income.

At the same time, the value of some trades can be deducted for business expenses. Most barter brokerages provide members with the IRS forms they need every year.

“Barter can help you leverage to get things you want, with what you have. All we are is a different currency” – BILL BAILEY PRESIDENT OF CHARLESTON-BASED BARTER BROKERS

For more information on barter for your business call: 1-800-200-5531 or visit. www.barterbrokers.com