EXPLAINER-Offer chain finance: Greensill’s business enterprise model

By Abhinav Ramnarayan

March 3 (Reuters) – SoftBank-backed British fund Greensill Cash is in talks to promote substantial parts of its enterprise immediately after shedding the backing of two asset administrators who underpinned parts of its multi-billion greenback offer chain financing product.


Provide chain funding, typically also referred to as reverse factoring, is a system by which corporations can get hard cash from banking institutions and funds this kind of as Greensill Cash to pay their suppliers without having to dip into their doing the job capital.

In a regular illustration, a enterprise these as a grocery store chain, involved about its modest food stuff suppliers throughout a temporary shock these types of as the COVID-19 pandemic, ways its financial institution.

The modest suppliers problem invoices to the grocery store, which confirms to the financial institution they are legitimate. Individuals suppliers then get their cash suitable absent from the lender, somewhat than acquiring to wait 30 days or even months to be paid by the retailer.

At the height of the COVID-19 crisis, use of offer chain financing is claimed to have strike a record higher in Europe, with banking companies by yourself earning about $27 billion in costs, information from Coalition demonstrates.


Offer chain finance does not have the exact disclosure prerequisites used to more standard forms of financial debt.

Providers included frequently say merely “we have an arrangement with suppliers for early payments” in their accounts, which presents the only genuine clue that they are successfully taking on likely big amounts of personal debt to spend suppliers.

Generally this does not occur to light until a corporation operates into hassle, a danger that prompted credit history scores company Moody’s to liken source chain financing to “tiger traps”.

Britain’s Carillion, Spain’s Abengoa and the United Arab Emirates’ NMC Wellness are significant profile examples of corporations which collapsed on the excess weight of personal debt, a great deal of it undisclosed.


Started by Lex Greensill, a former Citigroup and Morgan Stanley banker and adviser to the British federal government, Greensill is the major non-lender company of supply chain finance.

Its technological innovation-driven tactic has presented $143 billion of financing in 2019 across 10 million shoppers and suppliers.

In 2019, it secured $1.455 billion of funding more than two rounds from SoftBank’s Eyesight Fund, a single of the major enterprise funds money in the earth.

A spokesperson informed Reuters in December that it observed volumes and new business enterprise enhance in 2020 in the course of the COVID-19 disaster.

But Credit history Suisse and Swiss fund GAM this week suspended money linked to Greensill, prompting it to say it was in talks about promoting big areas of its enterprise. (Reporting by Abhinav Ramnarayan Modifying by Alexander Smith)