AUSTRALIA is set to be the springboard for Greensill Capital's global push into supply chain lending for agriculture.
Although well established in commercial business, supply chain lending is a relatively new concept for primary production and marks a major shift toward blockchain technologies.
The practice is generally centred on providing lower cost finance based on accounts receivable rather than traditional 'bricks and mortar' lending. However, it can also involve finance being made available on stored commodities, livestock inventories or even future crops.
Greensill Capital's newly appointed Australian Agribusiness head Justin Harrison said he was excited by the challenge of developing a system that unlocked lower cost capital for farmers.
It's all about providing small and large businesses with the tools to better manage their cashflows and balance sheets.
"It's all about providing small and large businesses with the tools to better manage their cashflows and balance sheets," Mr Harrison said.
"Some larger, integrated agricultural companies are already using these tools, but there are countless untapped opportunities for parts of the agricultural supply chain to adopt the same practices."
Mr Harrison, who has spent more than 30 years in agribanking including the past 16 years with Rabobank, said Greensill was in the process of modifying its phenomenally success IT platform specifically for agriculture.
Commercial businesses can typically access capital within 60 seconds. However, the lead time was likely to be longer for farming operations.
"Agriculture is more complex than a straight debtors book as experienced in most commercial businesses," Mr Harrison said.
"Fluctuating prices, shifting currencies, long production lead times and seasonal variations all change the risk profile for agriculture.
"But we're very confident the solutions are there. Once established we will expand the services globally."
Mr Harrison said Greensill was not about replacing traditional term lending but was focused on bringing forward cash flows.
"As we see it, the main challenge is the shortfall between what lenders are prepared to lend and the working capital required to run farms," Mr Harrison said.
Greensill Capital was established by Bundaberg-born farming brothers Lex and Peter Greensill. The UK based company is now recognised as the second largest accounts receivable business in the world.
Greensill essentially delivers finance at the bond rate, plus a margin.
Under the model the supplier typically receives the finance at the time an invoice is raised, freeing up available capital. The finance is then repaid when the payment is received from the product or service buyer some 60 to 90 days later. The model applies equally to goods or services.
The story Greensill launches major push into Australian agriculture first appeared on Queensland Country Life.