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Opinion
Matt Levine

Imaginary Invoices Are Hard to Collect

Also discount SPACs, digital yuan, index funds and pilot CEOs.

The basic way that Greensill Capital worked is that it would help companies finance their payables and receivables. A client would sell products to customers on credit, and Greensill would pay the client early at a discount and then collect the money later from the customers (“receivables finance” or “factoring”). Or the client would buy products from suppliers on credit, and Greensill would pay the suppliers early at a discount and then collect the money later from the client (“supply-chain finance” or “reverse factoring”).

The more advanced way that Greensill Capital worked is that sometimes it would sit down with a client and imagine who might one day become a customer of that client, and then imagine how much of the client’s product that hypothetical customer might buy from the client, and then Greensill would pay the client early for those entirely hypothetical receivables, and then Greensill would collect the money later from the customer, if the customer actually became a customer and bought things from the client. If not, Greensill and the client would keep rolling the loans over and hope that one day the customer would show up.