Greensill tight-lipped on CIMIC payday lending scheme
Greensill is refusing to say whether it has dumped Australia’s biggest construction company, CIMIC, as a client.
Greensill is refusing to say whether it has dumped Australia’s biggest construction company, CIMIC, as a client despite the global financier earlier stating it would not do business with companies that blowout supplier payment terms beyond 30 days.
Greensill’s billionaire founder, the Australian-born Lex Greensill, has threatened to ditch clients who squeeze suppliers using payday lending schemes — which involves suppliers cutting their invoices in exchange for prompt payment. “We will not let our SCF (supply chain finance) clients push out payment terms to SME suppliers beyond 30 days. If they want to do that, we will not do business with them,” Mr Greensill said on Friday.
CIMIC, one of Greensill’s biggest local clients, extended payment terms for one of its subsidiaries, UGL, to 65 days last September. At the same time CIMIC unleashed a finance package via Greensill for suppliers who wanted to be paid earlier.
Despite Mr Greensill’s public threat and CIMIC’s UGL payment terms being more than double his 30-day minimum, a Greensill spokesman declined to say whether it was reviewing its contract with CIMIC, citing a policy of not discussing clients.
Federal Small Business Ombudsman Kate Carnell said while Mr Greensill’s decision was a “big positive step”, her office would seek to ensure the company followed through on dumping clients with payment terms longer than 30 days.
“My office has the capacity to seek documents and will be ensuring that they follow through,” Ms Carnell told The Australian.
“Now, I understand these things can take time. It could take until the end of the financial year. But small businesses need to be confident that this is indeed happening.”
The use of supplier payday lending schemes — known as supply chain financing or reverse factoring — has been widely criticised by federal and state politicians and small and medium sized business owners who want to be paid on time by some of Australia’s biggest companies.
Key crossbench Senator Rex Patrick attacked companies that engaged in the practice, saying they were using SMEs as banks, while Ms Carnell has urged the Morrison government to introduce tougher legislation, standardising payment terms at 30 days for all businesses.
Payment terms of more than 30 days in the construction industry are already legislated in Victoria and Western Australia, with the two states having maximum terms of 45 days and 42 days under their respective construction industry laws, to the frustration of many construction subcontractors.
Meanwhile, In NSW and Queensland, Security of Payment legislation specifies 25 or 30 days — which falls under Mr Greensill’s threshold.
The payday lending schemes urge suppliers to cut their invoices or borrow money they are already owed — at annualised interest rates of more than 7 per cent a year — in exchange for prompt payment.
In a presentation to suppliers, seen by The Australian, CIMIC says Greensill calculates how much of hit suppliers will take on their bills based on the invoice’s amount, the bank bill swap rate (BBSW) and the days left on an invoice.
One supplier said the language in the presentation was confusing, with it not stating what BBSW stood for.
“A lot of SMEs don’t have the capacity to look into that and end up just signing it because they want to be paid on time,” the supplier said.
For example, CIMIC warns that “possible disadvantages” could be that “actual payments may be slightly different from expectations due to fluctuations in the BBSW and exact day invoices are paid”.
But it states in its advantages section “if the BBSW drops then the discount will reduce and your payment increases”.