Partner Article

Should businesses switch from a cash-based currency?

The UK’s alternative finance market is set to surge in 2015, according to a study by innovation charity Nesta and the University of Cambridge. The report, predicts alternative finance to businesses and consumers, would hit 1.74 billion pounds in 2014, before jumping to 4.4 billion pounds in 2015.

By the end of 2014, it is expected that alternative British lenders will have provided more than 1 billion pounds to over 7,000 SMEs – or 2.4% of all bank lending.

Philip Ciniglio, CEO for Bartercard UK Operations Ltd, responds:

“News that the alternative finance market is set for further growth comes as little surprise as we head towards the end of another year where SMEs felt the pinch as lending failed to improve despite the economic upturn.

The primary concern for companies across the UK is low cash reserves and given that small businesses can be the lifeblood of a healthy economy, enabling SMEs to access alternative sources of funding could be the solution needed to create new jobs and boost the prosperity of the entire country.

Alternatively, there is a totally cash-free trading method that has been steadily growing with 85% of the world’s fortune 500 companies operating their own in-house departments – a method that predates currency all together. That method is bartering.

In the UK, bartering is in a healthy state, with the total amount traded each year firmly into eight figures. It is also proven as alternative source of ‘cash-free’ finance - something especially attractive as the financial sector remains reluctant to return to previous levels of lending. Here at Bartercard, we also provide all our members with an interest free line of credit to facilitate their trading. This enables businesses to preserve cash and reduce traditional borrowing therefore reducing the dependence on cash and the banking sector.

Unlike alternative sources of finance, which according to Nesta and the University of Cambridge remains off the radar for almost half (42%) the people in Britain, awareness of bartering is significantly higher – with 94% of consumers understanding the bartering process and 74% who see the business-to-business trade exchange as a common practice in business today.

A significant factor in the growth of barter has been the development of trade exchanges like Bartercard. They provide transactional security and a record keeping facility that aids transactions and provides a firm platform for their members. In addition the trade exchange consists of a vast network of businesses that want to trade with each other. This gives members a huge advantage over their competitors who are not part of the growing barter community. These trade exchanges have been at the forefront of technology and innovation allowing transactions to be processed online and even with new mobile applications as well as traditional vouchers.

Today, it is possible to buy and sell almost anything on barter – trade networks have seen everything from bartering for a controlling interest in a music festival, to someone who bartered a large amount of snakes. For every quirky transaction, however, there are scores of more straightforward business deals – companies who cut their costs by sourcing everything from IT to business cards through a barter network; companies who get rid of excess stock by trading it with other firms in their area.

Bartering is also a great way to use spare capacity, be it goods left unsold, or work that staff members can do when they would otherwise be twiddling their thumbs. In the cash world, excess inventory or capacity might be disposed of through discounting or, in the worst instance, written off, bartering allows the full retail value to be realised. Because of this, bartering will always make business sense for companies with spare stock or capacity, regardless of the wider economic situation. Whatever the state of the economy, it is always better to pay for things that your business needs with your own products or services rather than using cash.

To really boost the economy, businesses and the government need to look outside of traditional bank loan models and take advantage of schemes that help preserve cash and improve profitability.“

This was posted in Bdaily's Members' News section by Brian Whitford .