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The Green SheetGreen Sheet

The Green Sheet Online Edition

May 11, 2009 • Issue 09:05:01

New Products

Revenue streams through referrals

Product: VendorVantage
Company: AdvanceMe Inc.

AdvanceMe Inc. has long furnished merchants with financial help, but its newest program, VendorVantage, is designed to buoy merchant vendors at the same time.

AdvanceMe indicated the program provides capital in two ways to merchant vendors. One, it helps them make sales to merchants by getting those merchants a money injection; two, it positions them to receive a commission on the repayment of that same advance.

For its part, AdvanceMe has been able to expand its clientele by attracting merchants through business partners with whom those merchants have a history.

"One of the things we've been hearing ... is that a lot of companies that provided a lot of traditional financing to vendors, or to merchants so they could buy things from vendors - leasing companies or banks or things like that - in the recent economic situation, they're getting a little tighter," said Mark Lorimer, Chief Marketing Officer for AdvanceMe.

"It's getting a little harder to get that money, and it's not only squeezing the merchants - it's squeezing the vendors," he added.

A slice of the pie

Through VendorVantage, merchant vendors who act as referrals for AdvanceMe become eligible for a commission with each merchant they refer; the size of that commission depends on the extent of the vendor's involvement.

"What [a vendor] would do is go to their existing base and say, 'You can either pay me through cash, credit card, or I can help you to get money to pay for this ordered through AdvanceMe,'" Lorimer said. How deeply vendors get involved is up to them - Lorimer said their involvement can range from simply referring the name of a merchant to actually assuming the role of an ISO and "doing the paperwork to sell AdvanceMe's product."

"Depending on what the vendor needs, we will structure the program and customize it," Lorimer noted.

Money injection

The "product" to which Lorimer refers is a merchant's "future receivables," which is what AdvanceMe purchases when it provides a money injection; the company obtains that "product" by taking a percentage (the size of which varies with each arrangement) out of every subsequent credit transaction the merchant conducts.

Merchant vendors participating in VendorVantage then get a portion of that commission.

For vendors "just flipping us a name," that portion is typically between 1 and 2 percent, Lorimer said, while those that "sell the deal end to end" get 6 to 9 percent of the commission.

And because AdvanceMe assumes the entire risk for such transactions - because they advance the money - the merchant vendor stands only to gain, Lorimer added.

The worst case scenario with any contract is that a merchant goes out of business. Yet, while AdvanceMe in that case would lose whatever money it fronted, the referring vendor would only cease collecting its percentage - without suffering a loss overall.

Indeed, if that vendor made a sale or had a loan recouped through AdvanceMe's purchase of an account receivable, it would still benefit from the arrangement - only without the added boon of the commission returns.

"It's more like an affiliate marketing program, because merchants have an affiliation with [the vendor]," Lorimer said. "Basically they're leveraging that relationship and expanding their ability to make revenue by selling this product to people with whom they have a relationship."

AdvanceMe Inc.
www.advanceme.com end of article

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