Part One - From tractoring to reverse factoring - Supply Chain Finance
- Ben Hoskin
The spectacular demise of Greensill Capital earlier this year was watched closely at 9fin.
We looked at names that confessed exposure to reverse factoring, although we note this list is potentially far from complete due to very limited disclosure requirements for the practice.
As a reminder, reverse factoring is the practice of suppliers receiving early payment on invoices from a financial institution, with the buyer on the other end of the invoice agreeing to send payment to the financial institution at a later date - thus the financial institution steps in to take on the counterparty risk for the price of a small haircut on the invoice it purchases from the supplier. A visual representation is shown below.
Source: PwC