Leading the Way — CIT Trade Finance Raises Awareness of A/R Factoring
Launching Factoring University has increased awareness about accounts receivable factoring and raised the presence of CIT Trade Finance as an expert in the industry. However, Factoring University is just one of the initiatives developed by the group’s president Jon Lucas and his team to approach the business from a new angle.
When people want to research a product or service, they almost always turn to the Internet for information. That is true even for professional services, like factoring. As recently as one year ago, there was no central repository of educational information about factoring. Because CIT has been in the factoring business for almost 100 years, Jon Lucas, president of CIT Trade Finance, decided to do something about it.
“As one of the leading factoring organizations in the United States, we wanted to lead the discussion about factoring,” says Lucas.
Lucas believed that if more small and medium-sized businesses became aware that accounts receivable factoring is a viable financing alternative, it would bolster demand for factoring, and hence CIT’s business. His solution: Factoring University (www.CITFactoringUniversity.com), a content-rich, educational website for business owners and their advisors to learn about factoring.
Users can educate themselves through a series of brief animated videos that explain the concept and benefits of factoring, how to minimize bad debt losses, and how to manage collections efficiently. Another video series includes interviews with small, medium and large companies in the apparel, textile and housewares sectors, who discuss why they use factoring and how it has benefited their businesses.
“The best factoring salespeople are factoring clients — there’s nothing like hearing them tell you why using factoring has been a smart business decision for them,” says Lucas.
Google “Factoring University” today, and this educational resource is listed on the first page. Motivated by the positive response to Factoring University, CIT created a Factoring University LinkedIn Group as well. With more than 400 members, the forum brings together business owners, their advisors and factoring professionals.
“We wanted to create a forum for people who have questions about factoring,” adds Lucas. “We have had some good discussions on topics like ‘When a business owner asks why they should use factoring, what do you say?’ So if you have a question about factoring, feel free to post it and see how the group responds.”
Not only has this dual online content strategy benefitted CIT, but it has helped the industry as well. “Two factoring companies reached out to us to thank us for providing factoring information and building a factoring community online,” says Lucas. “Here’s how we look at it — a rising tide lifts all boats.”
Factoring University is just one of the initiatives developed by Lucas and his team to grow the organization. Headquartered in New York, NY, CIT Trade Finance is one of the nation’s leading providers of factoring and financing to consumer product companies. Its clients include a broad range of public and private retailers — from $2 million to $1 billion in annual sales — nationwide and abroad.
With offices in New York, Los Angeles, Dallas, Charlotte, Atlanta and an operations center in Danville, VA, Lucas hopes to grow the company in a variety of ways, including enlisting all employees to think in a sales-minded way.
“We decided the time was right to encourage all employees to think of how they could contribute to the growth of CIT Trade Finance.
This renewed focus on business development and client service shouldn’t come as a surprise to anyone who knows Lucas. Prior to being named president of CIT Trade Finance in 2012, he previously served as chief sales officer. Before that, he was senior vice president and Northeast regional manager for the organization, responsible for client service and retention, business development and client credit quality. He spent most of his career developing financing solutions for companies in all stages of the business cycle.
Upon earning his master’s in business administration in finance from the University of Pittsburgh, Lucas joined Chemical Bank in 1982, where he began his career and received credit training. After five years at Chemical Bank, Lucas left to become a team leader and market manager in Fleet Bank’s middle-market lending group, learning how to manage financing transactions from unsecured lending to sophisticated lending for leverage buyouts and high leverage transactions.
Because Lucas excelled in analyzing collateral and structuring and negotiating transactions, working for a firm like CIT was a perfect match. He joined the company in 1994 and became regional manager in 1998. He was responsible for developing factoring, credit protection and asset-based lending business, primarily in the apparel, textile, housewares and home furnishings industries.
Lucas joined CIT because he was intrigued and attracted by providing factoring and asset-based loans to middle-market companies. “These were often loans that a traditional bank would not do. That was exciting to me,” recalls Lucas. “I wanted to get into structured finance and more difficult credits because it made better use of my credit skills, technical skills and accounting skills.”
Helping Clients Weather Economic Challenges
Although the country has faced some turbulent economic times recently, Lucas says that CIT’s clients have fared relatively well. Most of its small and medium-sized clients sell consumer products into retail channels of distribution domestically, and they have done a good job at adapting to the changing demands of retail. Plus, CIT’s accounts receivable factoring services have helped protect its clients against bad debt losses.
An ongoing challenge is that consumer spending habits have continued to ebb and flow, impacting retail, which flows down to CIT’s clients that sell into that space. According to Lucas, retailers have become smarter in managing their inventory. This puts pressure on their suppliers who have to manage their inventory and be ready to respond to retail orders quickly.
“In 2008, there were a number of high profile retailers that were over-leveraged and experienced some difficulties,” says Lucas. “As interest rates came down and they got their businesses in order, the retail sector turned around, and today retailers do a much better job of managing their businesses than they had historically.”
One of the challenges that many companies in the financing and banking industries are facing these days is recession-plagued Europe and the economic slowdown in China. CIT is doing fine in spite of the turmoil overseas, notes Lucas. Not many of CIT’s clients export products into Europe, so the European economy has had little impact on CIT.
However, many of CIT’s clients do manufacture their products in Asia. As the cost of labor and supplies in China has gone up and down over the past year, the instability has had an impact on the supply chain. As confidence rebounds from the last quarter in all sectors of China, Lucas says that there has been more demand for products, so the prices of the imports from China into the United States have gone up slightly.
“For years, Asian manufacturers required commercial letters of credit before they put the goods into production,” says Lucas. “Today most of the production is done on an open account; there is no letter of credit. That is one of the major changes I have seen over the last several years.”
Differentiating Factoring From Bank Lending
With CIT’s factoring service, if a client’s customer defaults on credit-approved receivables due to the customer’s financial inability to pay, CIT makes payment on the receivables. The factoring client does not take a credit loss. “In addition, we provide comprehensive accounts receivable management, cash application, collection services and online reporting. Those are all services that a traditional bank loan would not provide. This comprehensive accounts receivable management gives our clients peace of mind,” Lucas says.
“We have a terrific operations facility in Danville, VA and we have a comprehensive online factoring system that enables our client’s to access their information 24/7 and pull the reports they need, when they need them,” Lucas adds.
One other advantage that Lucas mentions is CIT’s deep industry knowledge of the vendors that sell into retail channels of distribution and the retailers themselves — the customers that CIT’s clients are selling into.
“All of our clients and their customers are a little different,” he says. “We’re able to tailor our factoring and financing services to the needs of each client. That is why factoring is a great alternative to traditional bank financing for small and middle-market companies.”
Daniel Casciato is a professional business writer and ABF Journal contributor.