What Can Business Owners Learn From The Greensill Collapse

By Jasmina Mujkic - Mar 11 2021

It has now been widely reported that global supply chain financier, Greensill Capital has filed for insolvency in the UK. This news has reportedly shocked many in the [global] Cash Flow Finance and Supply Chain Finance industry.

It would not have taken too much to see that this demise was inevitable.

Greensill came from nowhere to become a multi Hundred Billion Pound worldwide business in next to no time. It had high-profile politicians fronting the limelight, numerous executive jets, and high-flying entrepreneurs as its biggest clients.

Even in Australia, it has been reported that companies like Telstra, CIMIC, Whyalla Steelworks, and Australian Rail & Track were amongst its clientele.

All it took was one Trade Insurer to pull its Trade Credit Insurance for the whole house of cards to start crumbling. The final crash is still developing, the fallout will be massive. Just goes to show that sticking to fundamentals and easy-to- understand lending principles is the only way.

Greensill grew by developing and selling hybrid securitisation investment style bonds into the market backed by its Supply Chain Finance products, taking a cut at every step. The only issue was that just one client comprised a huge portion of Greensill’s overall exposure. This client/borrower also came from nowhere in next to no time.

Same story, Same ending, and Same no assets of real value.

Think back to the GFC with the securitization and marketing of hybrid Junk Bonds with no real underlying value. At the time, this scenario was often reported as just “smoke and mirrors” to fool investors and make a quick buck.

Here in Australia, many factoring companies also went headfirst into the Supply Chain Finance market. Thinking this is the way to go, spruiking its benefits to all and sundry.

The only real exception was Key Factors who stuck to what it knew best, cash flow finance to help SMEs with their cash flow.

Key Factors resisted the get rich quick brigade and continued to only offer what it knew to be great products that have withstood the test of time, since 1989 in fact.

Key Factors has never relied on, nor asked its clients to take out trade credit insurance.

Key Factors have always based their decisions on the quality of the debtors, and their trading history, not on some insurance policy whose only real worth was for the broker who sold it.

In fact, Key Factors bucks the trend in the Australian market as it does not source business from brokers or aggregators. Unlike virtually all its competitors that [almost] wholly rely on third parties for all their business referrals, and where those referrals could be based on the commissions to be earned, not on the benefit and product quality for the intending client. The Banking Royal Commission exposed enough of that going on.

It will be interesting to see how the market changes over the next 6 to 12 months as the others move away from their Supply Chain Finance love affair, but sadly also the fate of many SMEs caught up in the fallout of this current Greensill collapse.

If you are in the market for Cash Flow Finance that works, and you are done sitting on your unpaid invoices, Key Factors is the only company to really consider.

By partnering with Key Factors, you are working with a well-founded cash flow finance company that centers on basic lending fundamentals. Absolutely no reliance on debtor insurance. The quality of your debtors is paramount.

Key Factors has been in business since 1989.

Key Factors does not source business from commission-driven markets.

Key Factors does not ask its clients for debtor [trade credit] insurance.

Key Factors relies on good old fashion basic common sense, debtor quality, and spread.

The old saying: Never put all your eggs in the one basket, has the same, if not, more relevance today than ever before.

Partner with a cash flow finance provider that has stood the test of time. Call 1300 884 100 or complete our enquiry form and a cash flow expert will be in touch.


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