The recession prompts a return to the barter system on Long Island

Long Island Business News, Jun 4, 2009 by Ambrose Clancy

The recession giveth and the recession taketh away.

Just ask Rich Quinn, owner of Bay Shore's Capitol Barter eXchange. He's been busier than normal - his 700-member exchange is growing as the economy shrinks - with businesses seeking goods and services via the barter route instead of laying out cash. But Quinn's also been busier trying to collect his broker fees.

"People are tending to be very late on their cash fees they owe to the exchange," said Quinn, who has been in the barter business for 30 years.

A barter exchange is a collection of members who provide services or products to other members and get paid in dollar credits, which the exchange banks for them. Then, when they look for a service or product, they pay another member of the exchange in the credits they've banked without any real cash changing hands.

Quinn charges 10 percent of what the buyer would have paid in actual money for the goods or services.

He used an example of a dentist looking to get his car repaired. An auto mechanic who is a member of the exchange estimates the job will be $1,500 and the dentist pays out that amount in credits he's banked, plus $150 in legal tender to the exchange.

The mechanic now has $1,500 to use for everything from legal fees, veterinary care or to get his varicose veins removed. Quinn's exchange has even included a funeral home.

In addition to listing businesses, Capitol Barter eXchange sends out newsletters and e-mail blasts to keep members informed.

Some exchanges charge up to $500 to become members, but most exchanges feature free membership. The 10 percent fee collected from the buyer is industry standard.

According to the U.S. Department of Commerce, nationwide over 250,000 businesses actively use organized barter to supplement their monetary transactions.

The National Association of Trade Exchanges released a report in January listing more than 400 barter exchanges in North America with business increasing 12 percent in the past year.

Cliff Epand, owner of the Bellmore accounting firm Epand Boyle & Co., is an active member of a barter exchange. "I just got the interior of my garage redone with new flooring, cabinets and walls," Epand said. "And I got an awning over my patio. That was a good one."

Epand is also a financial advisor and has counseled some of his clients to look into barter exchanges. One client, a catering hall, uses a mix of barter and cash for some services. "For example, they'll sometimes charge for costs and put their profit on barter," he said.

One of the hottest barter services are restaurants, said Ken Paer, chief executive of Jericho's National Commerce Exchange, which has been in business since 1980. People use exchanges to control cash flow, but also to find new business, and restaurants see barter as an ideal way to seat new customers, he added.

"If I'm a barter customer and I go to a restaurant with another couple who is not a barter customer, and they have a great experience, they're more likely to go back to that restaurant and pay cash," Paer said.

Also the restaurant is busier which provides atmosphere, and an empty table is filled.

The restaurant in turn can cash credits for a host of services.

Quinn said he wants to keep costs to members down so it's easy to join the exchange. But the downside is trying to collect fees owed to him from cash-strapped members.

"We like to have a credit card on file but we're seeing credit cards maxed out," Quinn said.

What happens if people are late paying their 10 percent? "A lot of phone calls," Quinn said wearily. "Now, if transactions are more than $1,000, we get the money up front."