Atlanta Business Chronicle
13 July 2012
Atlanta banks have been working to capture new lending in the small-business market, but on smaller deals, they face competition from a much older form of currency: bartering.
Several barter banks have sprung up in Atlanta in recent years. The institutions are fee-based companies that match small businesses looking to keep some of their cash while still getting certain services.
Tradebank of Atlanta is one such franchise. Managing partner Kyle Walters said the group, which came to Atlanta in 2009, has grown its business by two-thirds in the three years it’s been in business here.
“We’ve really seen a huge increase in spending within our network since 2009,” Walters said. The company works with at least 1,000 small-business clients in Atlanta, and more than 8,000 businesses nationwide, though Walters didn’t want to disclose the exact number.
It works like this: small businesses, particularly service providers like restaurants and salons, open exchange accounts with Tradebank.
The businesses agree to provide a service, say, $100 toward meals at the restaurant, if the member is a restaurant owner. In return, Tradebank gives the restaurant $100 on a card. The business owner can use that on services from any of Tradebank’s network of businesses.
The fee Tradebank charges to facilitate transactions is between 12 percent and 15 percent, about the going rate on barter transactions nationwide, Walters said.
“We’re in this to make money, just like every business owner,” Walters said. “Because cash is perfect and the barter model isn’t, we have to constantly find how to fill it in.”
The small-business owners who decide to participate in bartering are taking a big risk: If they provide a lot of services, it’s possible they won’t get anything in return if the service providers they’re using leave the network.
Sanjay Banit owns Classic Touch Cleaners at Sidney Marcus Boulevard and Piedmont Road in Buckhead. He says when he first started bartering, he was worried he’d end up losing money.
“It was a risk in the beginning,” Banit said. “When I first joined barter, I was just curious about how I could spend. But now I actually have a waiting list of trading dollars I want to spend.”
Banit has been doing business with Tradebank since it came to Atlanta, but he also worked with Barter Consultants International, a Marietta-based company.
The problem with Barter Consultants was that you would provide services to the network, but not get anything in return.
“The service wasn’t there where people were willing to trade,” he said.
Barter Consultants has 3,000 members, though not all of them are active, said Gilbert Fisher, director of broker operations for the company.
Fisher was brought on in late June to help fill the gap Banit was describing: matching clients who’ve given services to the service providers they want in return.
“We work with them and find out what their needs are, then either match them with an existing member or sign a new one to fill that need,” Fisher said.
He cautions business owners to limit how much they’re offering to barter.
“It’s a way for companies to eliminate their excess,” he said.
Mit Amin, who owns The Beverly Hills Inn in Atlanta, says he’s been bartering for 20 years.
“It helps when I don’t have cash for something,” he said.
He says he’s lost money on barter networks that weren’t as well-populated.
“There are other trade companies in Atlanta I’ve lost money on in the past,” he said. “I’m very dubious about who I do business with.”
Volume in Tradebank’s network has grown to several hundred thousand dollars monthly, Walters said, though he wouldn’t specify exact amounts.
“It’s not the answer to a failing business. Cash is essential. But if you have the capacity to take on an extra job here and there, it’s absolutely essential that you make barter a part of your business model,” Walters said.