Unfortunately that sort of behaviour is common in many sectors where large companies subcontract with smaller companies.
The tactic basically created the whole factoring concept (buying invoices, or using invoices as security for a “loan”/credit).
Over here in Sweden it was construction companies that initially fuelled the development, and the large companies basically required very long payment terms (60+ days) from their subcontractors and then waited to the very last day to dispute the invoice by complaining on some part of the work, further delaying payment. A small subcontractor could often not front being out that much money (2+ months of salaries, materials and other operating costs, cost of fighting the dispute etc) and ended up going bust. Enter financial institutions buying (or “lending” with the invoice as security) the invoice, letting the subcontractor get paid immediately, but of course not the full amount since the factoring company wants to profit from the deal. The factoring companies being backed by large financial institutions (banks typically) have enough money that they can sit out those long payment terms and other “bullshit” since they know those large construction companies ARE good for the money they are owed EVENTUALLY.
Still carves into the margins for the small actors.
Unfortunately that sort of behaviour is common in many sectors where large companies subcontract with smaller companies.
The tactic basically created the whole factoring concept (buying invoices, or using invoices as security for a “loan”/credit).
Over here in Sweden it was construction companies that initially fuelled the development, and the large companies basically required very long payment terms (60+ days) from their subcontractors and then waited to the very last day to dispute the invoice by complaining on some part of the work, further delaying payment. A small subcontractor could often not front being out that much money (2+ months of salaries, materials and other operating costs, cost of fighting the dispute etc) and ended up going bust. Enter financial institutions buying (or “lending” with the invoice as security) the invoice, letting the subcontractor get paid immediately, but of course not the full amount since the factoring company wants to profit from the deal. The factoring companies being backed by large financial institutions (banks typically) have enough money that they can sit out those long payment terms and other “bullshit” since they know those large construction companies ARE good for the money they are owed EVENTUALLY.
Still carves into the margins for the small actors.