Recently, LDB invited Ken Wengrod of FTC to talk with us about financing in the fashion industry. Just days after we published our interview with him, a press release was issued acknowledging the possibility of CIT (the main factor behind the fashion industry) approaching bankruptcy. This not only affects designers needing financing, but it also could have severe ramifications for boutiques and even photographers, stylists and consumers.

Ken followed the news by contributing to this article, originally published in Apparel News. So before you throw in the towel on your fashion aspirations, read this. Here Ken discusses the possible positive side of the CIT bankruptcy. It might not be as bad for you after all.

(Click here to see original article)

Assessing the CIT Crisis and Its Impact on the Apparel Industry

by Deborah Belgum, Senior Editor July 31, 2009

For some time now, the apparel and retail sectors have been on shaky ground, with consumers buying less during this economic downturn.

When news surfaced that the CIT Group, the main factor to the majority of the apparel industry, might be close to declaring bankruptcy, another wave of financial bad news washed over clothing manufacturers and stores.

For the immediate future, CIT has skirted bankruptcy with a $3 billion emergency loan from bondholders in recent weeks after a $2.3 billion bailout last year in taxpayer funds. However, many are wondering whether the factor to 60 percent of the apparel industry can come up with enough cash to pay off future debt due in upcoming months.

With local manufacturers and retailers in a precarious state, the California Apparel News queried several factors in Los Angeles about what the future may hold for the apparel industry:

How is CIT Group’s financial situation going to affect the apparel and retail industry, and what should apparel and retail companies do to make sure they remain financially sound?

Ken Wengrod,
president, FTC Commercial Corp.

I think this is an extremely positive situation for the industry. From what I have read, the company provides about 60 percent of the factoring volume. We, as lenders, have advised our clients about avoiding concentrations.

So going forward, this could be a positive for the industry, so there is not one specific power house [factor] controlling 60 percent of the market.

I think it is important that there is diversification and competition.

With competition and diversification and not having one player, rates are one thing that will change. There may be more service and support. It behooves a company not to put all its eggs in one basket.

There might be some adjusting and correcting we may be going through, but in the long run, we will be better off. Thirty-one or 32 years ago, another factor, United Factors, had a huge share of the market and they filed bankruptcy. In the end, Crocker National Bank bought it. When that occurred, there was growth of other bank-owned factors and independent factors.

I believe this will open up the eyes of manufacturers to look at their customers as whether they are viable or not viable and be cautious about that.

I think we are going back to basics. It is imperative for manufacturers to keep their expenses as low as possible as well as diversify with anyone they are doing business with to make sure things are balanced.