Small Business Bartering Increased During the Pandemic. Is It Right for You?

It's fair to say that the coronavirus pandemic has taken a devastating toll on small businesses. In fact, as of late September 2020, almost 100,000 establishments that had previously shuttered temporarily evolved into permanent closures, reports Yelp. And with the pandemic still raging, it's fair to assume that many more local businesses will meet their demise in the course of the next six to 12 months.

A big part of the problem boils down to cash flow. While large corporations have options for raising capital (issuing stock, for one thing), small businesses are generally limited to smaller lines of credit or loans that can easily get exhausted during times of economic distress. And while there was relief available in the form of the Paycheck Protection Program (PPP), those loans were only minimally useful to businesses that aren't particularly payroll-heavy.

It's not surprising, then, that one trend really picked up among small businesses during the pandemic -- bartering.

Swapping services and skills instead of cash

For cash-constrained businesses, finding creative ways to stay afloat during the pandemic could be the key to survival. And that's where bartering might come into play.

According to BizX, a barter exchange platform, a growing number of businesses have been using its program to swap services rather than fork over cash. Since the coronavirus outbreak began, BizX's membership grew by 265 new accounts.

At present, BizX has nearly $10 million in outstanding lines of credit spread out among its members. All lines of credit have come with 0% interest since the start of the pandemic (the standard interest rate is 1.5%) and can be used to purchase key services businesses need to stay operational.

But beyond borrowing, BizX helps businesses free up cash by facilitating exchanges. Two companies might, for example, trade marketing services for technical assistance or help setting up a new website.

Restaurants are getting on board

Restaurants have been notably hard-hit during the pandemic. Not surprisingly, of the 13 million in BizX dollar transactions since the start of the outbreak, over 1 million came from restaurants. Dining establishments in particular have been less likely to benefit from the PPP since they tend to spend relatively little on payroll. But restaurants can really benefit from bartering -- for example, swapping free menus from a local print shop in exchange for meals.

The upside of bartering

Bartering is an age-old system that certainly has a place in today's coronavirus economy. If your business is struggling with cash flow, it pays to establish connections with other local businesses and see what services you can swap rather than having to lay out money you don't have. Furthermore, you may want to look beyond services and consider sharing ideas and resources. If you get an influx of protective gear, for example, you might consider gifting or loaning some of your supply to a nearby business that's lacking. That business may, as a thank you, send customers your way.

Of course, signing up for a platform like BizX is an option, too, but if you already have relationships with other local business owners, it may not be necessary. A more efficient bet, in fact, may be to establish your own local network and tap it as needed.

Unfortunately, there's a good chance the pandemic will continue to rage on for at least the first half of 2021 and quite possibly beyond, and while there's now more PPP funding available, it's not a solution for every business. If small establishments band together and help one another, it could be just the thing that gets everyone through the next six to 12 months and prevents more unwanted closures.