NEW YORK — With clients ranging in size from $2 million privately held firms to $500 million publicly held companies, CIT Commercial Services is the largest factor in the industry today.
WWD spoke with John Daly, president of CIT Commercial Services, about the company’s position in the market as well as the current state of factoring. Daly was in credit administration and secured lending for 30 years before being named president of CIT Commercial Services, a division of the CIT Group, in 1999. He recently led the acquisition and integration of HSBC’s and GE’s factoring portfolios by CIT.
WWD: How and when did CIT get into the factoring business?
John Daly: While CIT was founded in 1908, CIT officially entered the factoring business 20 years later, in 1928. We made our first acquisition of another factoring company in 1929 — a company by the name of Fredk, Vietor & Achelis, which had been founded a century before, in 1828. That underscores just how long the concept of factoring has been around. We have continued to build the business ever since. Today, factoring is a significant part of CIT’s business. We continue to invest in the product and hope to grow the business over the next 100 years.
WWD: How does CIT differentiate itself from other factors?
J.D.: We have invested a great deal in technology so we can deliver funds and information to our clients quickly and cost effectively. We have a state-of-the-art collections department in Danville, Va., that enables us to collect and process payments for our clients quicker and more efficiently than they could do it themselves. We also offer a full range of financing services, from letters of credit and import-export financing to revolving lines of credit and term loans. In addition, we often draw upon the expertise of CIT’s mergers and acquisitions department or capital market group when our clients require those services. We have built multilingual teams to serve the increasing number of clients who are based in Asia or who source from Asia. Our offices in Hong Kong, Taiwan and Shanghai provide us with a local presence to serve our Asian clients.
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WWD: What key challenges do apparel companies face today?
J.D.: Retail consolidation continues to be an issue for apparel companies. Apparel companies are concerned about the continued concentration of their customer base. Specifically, large retailers comprise ever-growing percentages of the average apparel maker’s sales. Apparel companies need to look at their largest customers and ask themselves what would happen if that customer went bankrupt. Could the apparel company sustain the financial loss? If the thought makes them shudder, they need to think about credit protection or factoring alternatives to protect themselves. A business owner wouldn’t buy a home and not insure it, yet some of these same businesspeople don’t take the necessary steps to protect their businesses’ greatest asset — its accounts receivable.
WWD: Factors want to offer their clients as many services as they can. How can or should factors be doing more for their clients? Can they be all things to all clients?
J.D.: I don’t think anyone can be all things to all people. You need to stand for something. We are leaders in managing and protecting accounts receivable. That includes everything from lending against accounts receivable to collecting them. But we do have the vast resources of the other business units within CIT, which we can offer to our clients. Those resources run the gamut from equipment loans and leases to financing for a private jet. Within CIT Commercial Services, we really don’t need to be all things to all people because we have the resources and knowledge of the rest of CIT, which we can bring to the table.