Greensill puts stop to SCF as a means of delayed payment
(7 February 2020 – Australia) Greensill Capital has committed to stop providing its supply chain finance services to big companies that use them to delay paying small suppliers.
Following threats of regulation from the small business ombudsman, Greensill’s founder and CEO, Lex Greensill on Friday said, “We will not let our supply chain finance clients push out payment terms to small and medium enterprise suppliers beyond 30 days.”
“If they want to do that, we will not do business with them,” Mr Greensill continued.
It is not clear if Greensill would immediately withdraw its supply chain finance services from existing clients such as construction group CIMIC, which has been using its schemes to delay paying bills by 65 days, or whether the stricter approach will apply to new clients only.
The announcement from Greensill came as small business ombudsman Kate Carnell on Friday said the Australian Securities and Investments Commission should consider regulating companies' "pernicious" use of supply chain finance.
Initial findings from a review of supply chain financing showed that while some companies legitimately use the scheme – also known as "reverse factoring" – to enable small businesses to get paid within 30 days, others used the schemes to push out payments by two to three months.
An East & Partners study of Australian importers and exporters found large discrepancies behind the understanding of ‘Supply Chain Finance’ with most SMEs and Mid-Market corporates taking it to mean receivables finance. Large enterprises consider supply chain finance to be akin to supplier payment terms.
Supply chain finance referred to reverse factoring for only 7.6 percent of Australian businesses.