Greensill

Greensill Capital was a financial services firm, founded in 2011 by Lex Greensill, that specialized in supply chain finance and related services before its collapse and entry into administration in March 2021. The founder's background as an Australian farmer, whose parents reportedly faced struggles with delayed payments for their crops, provided a compelling narrative for the company's mission to streamline working capital for businesses. Prior to establishing Greensill, Lex Greensill had developed expertise in supply chain finance at major financial institutions, including Morgan Stanley and Citibank.

The company's core business was supply chain finance, also known as reverse factoring. This service involved Greensill paying a company's suppliers earlier than the agreed-upon payment terms, taking a small discount as a fee. The corporate client would then repay Greensill the full invoice amount at a later date. This model was designed to help smaller suppliers manage their cash flow while allowing large buyers to extend their payment terms. To fund these operations, Greensill packaged the invoices into short-term, bond-like securities and sold them to investors, such as funds managed by partners like Credit Suisse, which provided Greensill with the necessary cash. The business model also expanded to include traditional factoring (purchasing a company's outstanding invoices) and a riskier practice termed "future accounts receivables finance," which involved lending against projected future sales rather than confirmed invoices.

Greensill's client base ranged from small and medium-sized enterprises to large corporations and government entities like the UK's National Health Service. Significant milestones included a $250 million investment from General Atlantic in 2018 and an $800 million investment from Softbank's Vision Fund in 2019, which accelerated its growth. However, the firm's rapid expansion masked significant risks. A major factor in its downfall was its heavy concentration and overexposure to a few key clients, most notably GFG Alliance, a metals conglomerate led by Sanjeev Gupta, which eventually defaulted on its obligations. The firm's business practices came under scrutiny for financing transactions between related parties and lending against speculative future revenues. The ultimate collapse was triggered in March 2021 when its primary insurer refused to renew coverage for its debt products, leading Credit Suisse to freeze $10 billion in funds linked to Greensill, which then filed for insolvency.

Keywords: supply chain finance, reverse factoring, trade finance, working capital finance, invoice financing, securitization, financial services, Lex Greensill, Greensill collapse, GFG Alliance, Credit Suisse, Softbank Vision Fund, future accounts receivables, factoring, debt securities, financial innovation, corporate finance, trade credit, asset-backed securities, payables finance, liquidity management, credit risk