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A barter system is a network of reciprocal trading partners. This network is established by written contract between the barter exchange and its members. This written agreement establishes, among other things, the terms and procedures whereby members make purchases and sales to and from each other. When sellers accept trade dollars in payment, they are extending credit to the other members of the network. The other members collectively have the obligation to fulfill the trade dollars of any member by selling goods and services to the member. In the simplest form, bartering exchanges are merely a payment-processing system that aggressively sells for member businesses.
A barter exchange is not like a commercial bank, which makes commercial loans and is liable for all demand deposits. A barter exchange does not extend credit, the members who accept trade dollars do. A barter exchange, as one of the members of the barter system, is liable only for its own borrowing (if any) and not for all the trade dollars in the system. The amount of borrowing by a barter exchange is limited by the members through the contracts in use in the barter industry.