Groupon has been writing big checks with little risk modeling.īy stretching out its payment terms, Groupon is reducing some of that risk, making Groupon campaigns less attractive to unstable businesses and scammers. Except that companies that knowingly do receivables factoring know they are in a risk management business and do due diligence before writing large checks. and Canadian business closely resembles a receivables factoring business. As I’ve been saying for nearly a year, Groupon’s U.S. They could mean that Groupon is finally waking up to the risks inherent in its model. Earlier this year, those payment terms were banned for all “service” deals, such as house cleaning and car washes.Īsked for comment, Groupon spokesman Paul Taaffe responded, “Most payment terms are as they have always been.” The new contract also includes a refund reserve that Groupon can use to cover refund losses.Īccording to a former Groupon salesperson, reps had the ability to adjust payment terms to 90% right away and 10% after 60 days. According to a contract I received from a Groupon merchant, the payment terms on the most recent deal the merchant ran changed to 25%, 25%, and 50% (click on image below to view). Groupon seems to be working to address that. The upfront cash, while an important selling point for some businesses, has been a significant business risk for Groupon, as seen by the company’s earnings restatement due to higher-than-anticipated refund costs. (There have been some variations, but this has been the standard model.) In the rest of the world, merchants are paid when vouchers are redeemed. In the United States and Canada, merchants have been paid in three installments: 1/3 five days after a deal closes, 1/3 30 days after, and the balance 60 days later.

The company has traditionally used two different payment models.