Billionaire tops big four banks for short-term lending
One of the nation’s newest billionaires wants to work with local superannuation funds to help lend more short-term money to small and medium businesses, as his supply chain finance business has experienced booming growth in Australia following the banking royal commission.
Lex Greensill, the Londonbased founder of Greensill Capital, said that in the first six months of this calendar year his firm did four times the business in Australia that it did all of last year.
It has now provided more than $3 billion to a group of more than 25,000 SMEs in Australia and moved to usurp the role of the big four banks in providing shortterm, supply-chain finance to business.
“Through a combination of technology and service and great people, we have eroded the hold that the big four have on the marketplace to the point that we are the biggest provider in the Australian market,’’ Mr Greensill told The Weekend Australian.
“It comes down to the fact we have been prepared to invest in the technology in how we integrate to our customers and the capital markets to deliver that ultra-cheap capital to small businesses in Australia. I don’t know if our increase is a product of the banks’ problems or our great service.”
Supply-chain finance is a way for big corporations to use cash supplied by third parties — it used to be banks, but now increasingly fintech companies like Greensill are using the cloud to offer new forms of finance — to pay their suppliers early.
As a result, the suppliers (usually SMEs) get faster access to the money they are owed, giving them more cash on their balance sheet, while the big company generally gets more time to pay its supplier.
Last year Greensill backed the $700 million purchase of steelmaker Arrium by the Londonbased Liberty House Group. It also finances the handsets for mobile phone giant Vodafone in Australia.
In July, Greensill received a strategic $US250m ($350m) investment from global private equity firm General Atlantic, which valued the finance firm at
$1.64bn and made Greensill and his brother Peter — who runs the family’s Greensill Farming operation in Bundaberg — billionaires overnight.
The funding will help the firm expand into China and India. It recently established an office in Singapore.
Greensill’s latest accounts lodged with the Australian Securities & Investments Commission revealed it made a $20m profit in the year to December 31, 2017. This compares with a $62m loss for 2016.
Last year’s result was struck on revenue of $138m, compared with $56m a year earlier.
Since it was founded in 2011, Greensill has facilitated payments to 1.5 million suppliers and provided more than $US40bn of financing across 50 countries, the money coming from the Bremen-based Greensill Bank (known as Nord Finance Bank before it was bought by Greensill in 2014) and four finance funds run by international institutional investors.
“We have tried at various points in the past to work with superannuation firms and Australian investment managers,” Mr Greensill said. “They have been cautious in terms of their willingness to look at what appears on its face to be a new asset class.”
He said he was open to working more with local super funds, especially as Greensill grows into more long-dated transactions such as the Arrium deal.
“When you think about the profile of a super fund, it doesn’t match ours. While we do provide some long-term capital to customers, the bulk of our business is short-term capital … However as we have grown into doing more long-dated transactions, it becomes far more appropriate for them to work with us.”
He said that as the financing of small companies moved away from the big banks, it was “natural and appropriate there will be a role for super funds to participate more”.
A recent paper by Industry Super Australia chief economist Stephen Anthony argues that in the right circumstances, superannuation funds could provide capital for growth to SMEs and business more generally, complementing more traditional capital sources such as banks.
Lex Greensill at the family farm in Bundaberg