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UNITED STATES —
Shawn Cressman, president of
Cressman's Lawn & Tree Care, the business his father started 33 years
ago in Bethlehem, Pennsylvania, has occasionally engaged in trading with other
outfits over the years. But transactions were usually informal and not
necessarily directly tied to the company's bottom line.
These days, though, Cressman sees trading as a significant way to reduce
cash outflow. Last fall he joined the Stroudsburg, Pennsylvania, Merchants Barter Exchange, an association
that coordinates and organizes trading of products and services among
its more than 10,000 business members. In September, when the
transmission blew on one of the firm's trucks, Cressman turned to the
exchange and traded for a replacement. "That would have cost between
$1,500 and $2,000, and that was not in my budget," he says. He also
traded to acquire a $4,000 piece of stone-crushing equipment. "I
probably wouldn't have bought one this year," he says. "It would have
had too much of an impact on my cash flow." But as a result of strategic
trading, Cressman estimates he has been able to save about $6,000
total so far this year.
In recent years,
trading has gained credibility as a relatively easy path for small
outfits to attain goods and services without having to dig into their
coffers. It has also become a successful channel to attract new
customers and expand one's business. According to the most recent
numbers compiled by the National Association Of Trade Exchanges (NATE)
in Mentor, Ohio, some 400 trade exchanges in the U.S. and Canada generate transactions worth
$4 billion a year.
On The Upswing
And now, with banks cutting back on credit lines or shutting them down
altogether, the use of commercial trade exchanges has gained renewed
momentum. Notably, Thailand, the world's largest rice exporter, last
month announced it planned to trade rice for oil from Iran, one of
world's top ten rice importers. For small businesses, ramping up their
own use of trade is a strategy that allows
them to reserve cash and still expand operations at a time when credit
lines have yet to thaw.
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Tom McDowell, executive director of NATE, says he has seen a 10% to 12%
increase in new clients joining organized trade exchanges. "Suddenly, business owners were running
into different obstacles, and they started looking for other avenues for
resources, not just credit," he says. "The interesting thing that is
happening in this economy is that businesses still have inventory and
capacity. They still have expenses. What they don't have is customers."
A Way To Get Credit
Merchants' founder, Steve Bolles,
says membership in his eight-year-old exchange, which has offices in
thirty states, has tripled this year. As the financial situation remains
bleak, Merchants continues to ramp up clients. "Just eighteen months ago, when we
would go and talk to business owners about signing up, they would say,
'We don't need to talk to you.' Now everybody gives us an appointment."
A strong inducement: "Everyone we sign up gets a line of credit right
away," Bolles says.
"Most people are looking to conserve cash," says Ralph Sigler, who owns
Carolina Packaging & Supply in Raleigh, N.C. "We started trading about
twelve years ago. The way we were growing, it made sense to substitute
trade dollars for cash dollars."
Sigler says he traded to obtain everything from security system
installations to letterhead and envelopes. "I've saved anywhere from
$20,000 to $25,000 a year by trading, and I've also taken on a lot of
new accounts."
Commercial trade serves as another avenue to
help keep businesses afloat. "I would say my trading has gone up 20%
in the past six months," says Mike Cody, owner of Chip & Crack
Windshield Repair in Garner, North Carolina. "At first I used it for
hotel stays and gifts to employees." Now he says he has begun to trade to obtain
equipment for his business instead of having to spend cash. "If I were
to make a guess, I'd say that I've saved over $1,000 this year."
"Eventually we will see a shift in
thinking," says NATE's McDowell. "What will happen is that people who
were reluctant to use the credit line, or used it sparingly, will see
the tremendous credit crunch and will look for new resources. They will
find that they can use trade exchanges." |
