Unlocking supply chains sets trillions in cash free for good
More than $5 trillion is locked up in vast supply chains that deliver the products and services that enable our globalised economy to function.
Imagine what an innovative and modern business, small or large, could do if access to such a large pool of capital were available to it? The possibilities are endless: a new manufacturing plant, a global expansion plan or even something as simple as payroll and funding capital expenditure.
This is what that cash should be doing, but it can’t because it is locked up in unpaid invoices of companies all around the world, struggling with inefficient supply chains funded by cumbersome traditional banks.
Much of the cash is owed to small and medium-sized enterprises that, in the most extreme cases, may have to wait up to nine months to get paid. Sometimes they cannot hang on and are forced out of business through no fault of their own.
Greensill, the world’s leading provider of working capital finance, is changing this with a unique technology-driven approach that is helping to oil the wheels of the global economy and keeping supply chains all over the world running smoothly.
Supply chain finance (SCF) has been around for more than three decades and the market has grown by around 30 per cent in the past eight years. This increase is largely because technology-driven SCF programmes have become recognised as much more efficient and cost effective than other forms of finance such as taking on debt.
We are always looking ahead, asking ourselves how we can further revolutionise working capital finance
Today, however, big data and artificial intelligence are among new technological advancements disrupting traditional working finance models to produce ever faster, easier and more efficient ways of providing companies with the cash they need.
“There are going to be a bunch of very significant changes that take place over the next few years and the broader finance industry, frankly, isn’t really keeping up,” says Lex Greensill, founder and chief executive of Greensill. “Greensill is way ahead of the curve.”
Founded in 2011, Greensill is the world’s largest non-bank provider of working capital and has become one of the leading disruptors in SCF.
The London-based company has offices around the world and has extended $50 billion of financing to a pool of 1.7 million suppliers in 60 countries since inception. It also owns Greensill Bank, based in Germany, and runs a suite of SCF funds which together have more than $5 billion of assets under management.
Greensill’s mission is the democratisation of capital, making cash available to the smallest of firms on the same terms traditionally enjoyed by the biggest multinationals.
The firm works with some of the biggest and most complex organisations, with supply chains that include tens of thousands of companies, to devise unique and innovative working capital solutions.
For example, Greensill has helped Boeing change the way aircraft purchases are financed without the need for traditional US and European export-import bank support. It has assisted telecommunications providers such as Vodafone in finding a cost-effective way of financing increasingly expensive mobile phone handsets for millions of consumers worldwide.
By reimagining mobile phone handset financing in Latin America, Greensill is putting smartphones in the hands of more people in remote regions who can now connect to the wider world on a scale not previously possible. In Australia, meanwhile, the company is working with its largest clients to devise a new means of providing finance for indigenous-owned suppliers in an effort to level the playing field and democratise capital further still.
Greensill also works with governments. It is the sole provider of SCF to the UK government through a £1-billion programme with the Crown Commercial Service. The government SCF scheme ensures prompt payment to high street pharmacies, which were being hampered by slow government payment mechanisms. North of the border, Greensill also devised a unique financing plan with the Scottish government to provide low-cost hydro-energy.
“We are always looking ahead, asking ourselves how we can further revolutionise working capital finance,” says Mr Greensill. “Every day we ask ourselves ‘how can we unlock that capital so our clients can put it to work?’ That’s what gets us out of bed in the morning.”
To that end Greensill has recently developed a data-driven version of its basic product.
As the suppliers that have provided invoices to Greensill over the past eight years automatically feed information into the firm’s systems, this trove of accumulated data has become a vital resource in providing an evermore efficient route to unlocking capital. The quantities of data are so large that the only way to analyse them and put them to the most effective use is with artificial intelligence and machine-learning.
“By constantly analysing this data, we get a real-time view of any company’s financial health an from this we can deduce risk with an unprecedented degree of accuracy,” Mr Greensill adds.
As the digital age gathers pace, the need for innovative solutions to the funding, development and manufacture of new products, and the evermore complex supply chains behind them, will become greater.
For example, the rollout of 5G connectivity over the next three years is expected to see the rise of autonomous machines and emergence of completely new industries connected to the much-heralded internet of things. Greensill forecasts show that the development of the so-called fourth industrial revolution will require upwards of $2.7 trillion by the end of 2020 alone.
It represents a huge challenge to the whole concept of SCF. Yet there is plenty of liquidity in financial markets, more than enough to fund a future of self-driving cars, robot surgery and all the other imagined applications that will rely on 5G technology.
Working capital finance will evolve to meet any challenge, using artificial intelligence and big data while tapping into financial markets. Modern technology is helping Greensill make cash available to a wider cross section of companies in a way that is more cost effective, faster and easier.
“We are in a technological arms race to provide access to an enormous global pool of capital,” Mr Greensill concludes. “Greensill is winning that race right now and through the hard work of our excellent people all over the world, we innovate every day to ensure we continue to unlock that capital so our clients can put it to work.”
For further information please visit www.greensill.com