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SMBs Increasingly Use Barter to Stay Afloat

Barter, otherwise known as reciprocal trade, has experienced rapid growth since 2000, on par with the growth of venture capital equity financing as a creative financial method to increase revenue for media planning, carrying through with effective advertising plans, winning new customers, and reducing inventories, according to a report released by the International Reciprocal Trade Association. SMBs use barter on a consistent basis, joining bartering networks that streamline the communication and negotiation process, and educate clients on bartering taxes and methods. Through 2007, the IRTA expects bartering to increase at a rate of 10% per year.

Bartering Media Planning for Cost Effective Advertising

One of the largest and most popular uses of barter among SMBs is to increase revenue through effective advertising. Bartering networks increase ease of access to other companies willing to deal with trade dollars rather than cash; companies that realize the potential of bartering to increase revenue and drive new customers to their business they could not have gotten through more “conventional” measures.

  • Angel Investors Spur Barter Growth

    Barter is particularly popular among groups such as angel investors—tightly knit groups of investors aiming to bridge (and profit from) the gap between borrowing and venture capital. Angel investors, already closely associated since the establishment of local, regional, and national groups in the 1980’s, have used their interconnectivity with leading companies undergoing volatile growth (and therefore frequently outgrowing and needing to shed assets), and those just crawling into the radar of nano cap from the DBA realm to help clients save and increase revenue by using creative business financing and barter to obtain expensive but necessary assets, spur media planning, and outsource creative advertising.

  • Bartering for Media Buys

    Creative advertising funding is one of the most popular uses of barter trade, as well as the easiest to manage as far as bartering taxes are concerned. Several large barter trade companies offer their services at additional “discount” to companies using barter to engage in media buys or increase revenue for cost effective advertising. These discounts generally are made up of reduction in rates of trade-to-cash dollar ratios, sometimes even providing funding for creative media planning and advertising as an incentive for SMBs and large corporations alike to climb aboard for their other services.

Corporate Barter Catalyzed in ´02 ­ ´04

Barter is, obviously, not quite as intrinsic to the growth of corporate budgets as it may be to SMB's (SMBs made up near to 75% of bartering exchanges in '02-'04, according to the IRTA's bi-annual study, while corporations lagged at 25% participation in bartering networks and trade companies), but did experience growth in the last measured term, with corporations making up the core of goods and services trading, use of trade credits and/or cash equivalent credit. Corporations, despite making up less than ¼ of all barter participation, have helped to establish the credibility and spur growth of bartering and creative financing.

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