Greensill Capital: could their collapse affect your business’s cashflow?

28 April 2021 | Thoughts and Opinions

Greensill Capital: could their collapse affect your business’s cashflow?

Nearly 50,000 jobs have been left at risk following the announcement that Greensill Capital has entered insolvency. The supply chain finance firm was founded by the Australian Lex Greensill with the aim of ‘making finance fairer’ and ‘democratising capital.’

But the company, which also set out to make it easier and faster for companies to pay their bills, filed for insolvency protection in March this year. One of the worst-hit companies is Liberty Steel who counted on Greensill as its main financial backer.

Greensill’s collapse has left Liberty Steel, an employer of around 5,000 workers at a number of sites across the UK, facing an uncertain future. According to recent reports, the company is now seeking a government bailout to help further bolster the future of the business.

The crisis at Greensill – who counted former Prime Minister David Cameron as an adviser – comes amid growing concern that many businesses will face insolvency battles in the coming months as they aim to recover losses caused by the pandemic.

We specialise in supporting ambitious businesses from start-up to scale-up and advise clients at each stage of their growth, including companies who may be facing the threat of insolvency. For businesses in this position, being able to access affordable legal support can often be crucial in navigating a way through a highly-stressful and traumatic period.

Eleanor Stephens, a recovery and insolvency solicitor at Harper James, who regularly advises clients in this area, believes the Greensill case could eventually have far-reaching implications. She said: ‘The collapse of Greensill could have significant repercussions for the cashflow position of many businesses. Companies in different sectors have been relying on this type of supply chain financing to maintain healthy cashflow and stay afloat while waiting for payment from creditors.

‘If companies go back to waiting for 2-3 months before being paid for supplies, then this could be the tipping point for many who have only just been treading water during the pandemic, using a mixture of loans, furlough, and being paid on time for what they do manage to supply, made possible by supply chain financing. 

‘Greensill is arguably the market leader and initiator of this financing, and their collapse could have a knock-on effect for thousands of businesses across the world. For any company facing the prospect of entering into insolvency, having expert and honest advice about the best steps to take is critical in ensuring the overall level of damage caused to a business.’

Are you concerned about the future of supply chain finance and how your business may be affected? Get in touch with us and speak to one of our finance or insolvency legal experts early: we can help you deal with challenges in your business before they become full-blown problems.

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