Plain explainer
What is a trade network?
A trade network is a group of local businesses that sell to each other for credits instead of cash, with every trade recorded. One credit is $1 of purchasing power with members. A member earns credits by selling what it already sells, then spends those credits with any other member business. You don't have to buy from the business that bought from you.
How a trade network works
The loop is simple. A member sells to another member. The network records the sale, and the credits post to the seller. The seller then spends those credits with any other member. No cash changes hands on the trade itself.
Open capacity is the part that makes it work. Most businesses have hours, seats, appointments, or inventory that go unused on slow days. That unused capacity already costs money. Selling it to members turns it into credits you can spend on something the business needs.
Here is a concrete example with three members.
- A landscaper has an open crew day in a slow week. He mows and cleans up the yard at a dentist office for 1,200 credits. He earns 1,200 credits.
- The dentist paid with credits she earned earlier by giving cleanings and crowns to other members. Her chair time was going to sit empty anyway.
- The landscaper spends his 1,200 credits at a restaurant in the network. He hosts a staff appreciation dinner and a family birthday there.
- The restaurant fills tables on a slow Tuesday. It then spends its credits on printing, auto repair, or a chiropractor inside the network.
Notice what did not have to happen. The landscaper never needed dental work. The dentist never needed a lawn crew from the restaurant. Credits break the chain apart so each member can buy and sell on their own timeline. Every step is recorded, so every balance stays accurate.
Members stay in control. Each business chooses which offers take trade and when, cash customers stay exactly as they are, and one switch pauses new trade customers anytime.
Trade network vs. direct swaps
A direct swap is a one-to-one trade between two businesses. It works, but it is slow and rare. A trade network changes the mechanics. Here is how the two compare on the things that matter most.
| Factor | Direct swap | Trade network |
|---|---|---|
| Matching | You must find one business that wants what you sell and sells what you want, at the same time. | You sell to one member and spend with any other member, when you are ready. |
| Valuation | Both sides negotiate what the swap is worth, deal by deal. | Everything is priced in credits. One credit is $1 of purchasing power with members. |
| Recordkeeping | Whatever the two businesses write down, if anything. | The network records every trade and keeps a credit balance for each member business. |
| Tax reporting | Each business tracks and reports its own swaps on its own. | Each business gets a Form 1099-B for its trade after year end. |
| Reach | One trading partner at a time. | Every member in the network is a potential customer or supplier. |
The matching problem is the real difference. In a direct swap, both sides have to want what the other has, at the same time, at the same value. That almost never lines up. A network removes that requirement, which is why businesses can trade all year instead of once in a while.
What are credits?
A credit is the unit members trade in. One credit is $1 of purchasing power with members. Members earn credits by selling their goods or services to other members, and they spend credits on what other members offer. Credits are spent only inside the network and can't be exchanged for cash.
Credits post to the seller when the buyer confirms the trade, or on their own after 7 days. If something goes wrong, a problem can be reported within 30 days. Earned credits roll forward month to month.
Read the deep dive on how credits work.
What can businesses buy and sell on a trade network?
Almost anything a local business already sells can take trade. Services move fastest because unused time is the easiest capacity to sell. Common categories include:
- Contractors and trades, including electrical, plumbing, HVAC, and painting
- Home and property services, including cleaning, landscaping, and handyman work
- Health and wellness, including chiropractic, massage, and dentistry
- Automotive, including repair, detailing, and window tint
- Food and drink, including restaurants, catering, and coffee shops
- Marketing and creative, including photography, video, web design, and printing
- Professional services, including bookkeeping, insurance, and real estate
- Beauty and personal care, including barbershops, nails, and esthetics
A network works best when the categories are balanced. If too many members sell the same thing, they compete for the same credits. If a category is missing, members have nowhere useful to spend. See the kinds of offers on trade.
Are trades taxable?
Yes. The IRS treats income from trade like cash income. If you sell 5,000 credits of work this year, that is $5,000 of reportable revenue. Purchases made with credits can be deductible business expenses the same way cash purchases are. Trade exchanges report each member's trade sales for the year on Form 1099-B.
Read the deep dive on taxes on trade, then confirm details with your accountant.
Who runs a trade network?
The exchange is the recordkeeper of the network. It records trades between members, keeps the credit balance for each member business, and sends a Form 1099-B to each business after year end.
The exchange also does the work that keeps a network usable: helping members find each other. In Red Rock Trade, members find each other in Discover, on the map, and through suggestions in the app.
A good network is judged on its records and its membership. Records should be accurate and easy to check. The membership should include businesses members actually want to buy from. Ask any network how it records trades, how members see their balance, and what it costs in writing.
Frequently asked questions
- What is a trade exchange?
- A trade exchange is the organization that runs a trade network. It signs up member businesses, records every trade between them, and keeps a credit balance for each business. After year end it sends each business a Form 1099-B for its trade.
- How do businesses join a trade network?
- With Red Rock Trade, a business signs up online, lists what it already sells, and chooses which offers take trade and when. Every new owner gets starter credit to spend with any member. It is a gift, not a loan.
- What does a trade network cost?
- Many trade exchanges charge a membership fee plus a percentage on each transaction. Red Rock Trade has no transaction fees. You pay one monthly price, with plans from $59 a month.
- Is trading through a network legal?
- Yes. Businesses in the United States trade goods and services through organized exchanges, and the IRS has reporting rules for them. That is why a trade exchange keeps a record of every trade and reports each member's trade sales for the year.
- What is the difference between a trade network and a trade exchange?
- The network is the group of member businesses that trade with each other. The exchange is the operator that records those trades and keeps each member's balance. People often use the two terms for the same thing, but the exchange keeps the records and the network is the membership.
- How do credits keep their value?
- One credit is $1 of purchasing power with members. Credits are spent only inside the network and can't be exchanged for cash. Earned credits roll forward month to month. Credits stay useful when the network has enough kinds of businesses for members to spend on real business needs.
Related reading: how credits work, taxes on trade, and what is on trade. You can also see how Red Rock Trade works.
Red Rock Trade is a local business trade network for St. George, Washington County and Iron County.
No transaction fees. One monthly price, with plans from $59 a month.