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Greensill shrugs off ASBFEO supply chain finance review

Greensill shrugs off ASBFEO supply chain finance review

(4 November 2019 - Australia) The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) announced a review into the impact of supply chain financing on SMEs.

The review will look at specific industry sectors, along with the broader impacts on small businesses using this finance and related reporting practices by big business with a final report released in April 2020.

The review will examine how small businesses can use supply chain finance to better manage cash flow and fund growth while also investigating supply chain finance offerings being used by larger businesses to offset extended payment times. As part of the ASBFEO’s review into payment times, consultations with large businesses revealed that supply chain finance arrangements were being offered as an option for earlier payment to suppliers but since then there has been a significant number of small businesses contacting the Ombudsman in relation to supply chain financing issues, coinciding with greater media scrutiny.

“Supply chain finance is a legitimate and effective tool to free-up cash flow for small and family businesses. However, it is totally unacceptable for big businesses to use supply chain financing arrangements as a replacement for reasonable payment terms being offered, 30 days or less from invoice” said Ombudsman Kate Carnell.

“This review will provide a clearer picture on the range of supply chain finance options available on the market and which industries are using these products. More large businesses are offering supply chain finance to small businesses and we are keen to find out what’s driving that. The review will investigate whether supply chain finance is being used by big business to stretch out formal payment terms and as a strategy to manipulate the reporting of working capital and cash reserves” Ms Carnell added.

The review is commencing amid Greensill, a leading non-bank provider of working capital finance for companies globally, securing an additional US$655 million investment from the SoftBank Vision Fund on top of the US$800 million investment made in Q2 2019. Proceeds will be used to accelerate Greensill’s international expansion plans and to finance strategic acquisitions of complementary businesses into the Greensill family, continuing its ‘track record of disrupting traditional financing’. Since 2018 Greensill has raised more than US$1.7 billion from leading institutional investors, General Atlantic and SoftBank Vision Fund.

“We believe Greensill is transforming global access to working capital through its innovative business model. By unlocking billions of dollars in supply chains around the world, we believe Greensill continues to play a pioneering role in working capital finance” stated SoftBank Investment Advisers Managing Partner and SoftBank Vision Fund Manager, Colin Fan.

Greensill Founder and CEO Lex Greensill won the 2019 EY Australian Entrepreneur of the Year award, stating that the award was recognition his company was making capital more accessible and he believed Australian companies were moving to shorter payment times and treating smaller suppliers better.

"I think there’s a broad recognition amongst business and government that is the direction and technology has a role to play as well. "What worries me is that this becomes something of a witch hunt. We think that our supply chain finance tech is allowing businesses to access capital at a cost of just over one per cent per annum. The great thing about the tech we deliver is it's giving completely democratic access to that low cost capital. In fact, the alternative to this is people using overdrafts or old fashioned factoring, which is vastly more expensive” Mr Greensill commented in response to the ASBFEO review.

"My sense is that the ASX50 tells you a clear message - there’s a big weighting in the direction of Australia's biggest financial institutions. It seems amazing and wrong. The ‘march of the fintechs’ will hopefully cause incumbents to ‘lift their game’” he added.

Small businesses and family enterprises who have had experience with supply chain financing can contribute to the Ombudsman’s review via inquiries@asbfeo.gov.au

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