We are approaching the mid-year of 2011, nearly three years since the historic nuclear meltdown of the banking/finance industry. While our finance nation is still sickly and weak, I prefer to have a humble outlook where recovery is modulated by discipline.

Being reflective, I believe that more banks have failed than at anytime since, “The Great Depression.” We all know how a number of big-name giant financial services institutions received unprecedented, unimaginable amounts of monetary assistance from the Federal government. We know that the aftershocks adversely affected the business credit units of banks, factors and asset-based lenders — a number of which had banks as credit line sources.

The pullback of private equity and investor capital contributed to the elimination and retrenchment of firms in our sector. Only in the past several months have factors like RMP Capital Corporation started seeing a pent-up demand coming to the surface. The private equity and investor capital crowd now appears willing to fund commercial finance firms again, however, in exchange for returns at peak rates. In consideration of their cash, they bluntly tell you they do not want any high-risk deals. While all factors and ABL concerns should adhere to our industry’s quality credit standards and principles, the demands by providers of cash to some extent handcuff our firms. Fortunately, account debtor credit seems to be improving.

TEXTILES

This activity is all overseas, so right now there is very little participation from factors and ABLs. If there is any business to be had, it will come from a small number of boutique or specialty manufacturers, perhaps entrepreneurs. As I previously mentioned, enhanced account debtor quality is making these businesses a little more appealing. Moving into 2012, it remains to be seen exactly how the projected rising inflation and the push to “buy American” will impact this sector.

APPAREL

The picture is brighter than it has been. However, when you start over from the bottom, everything is relative. There is more factor and ABL confidence about getting paid. It is critical that commercial finance people watch out for booby traps and landmines, where a big retailer goes bankrupt and stiffs your client. It remains to be seen how the account debtors will handle payments during rising inflation. It will require retailers to pass on higher costs and mark-ups. The difficult management culture, which has prevailed the past several years, has been not to stock up on inventory, keeping it lean, and only allowing your client to make deliveries just as items are moving off the shelves.

ELECTRONICS

Enthusiasm, which factors and ABLs had over the past several years because of newly created products, has really cooled off. There has been major price devaluation on products therefore a factor and its client must be wary of not getting tripped up. There does appear to be some upgrade sales activity if a factor’s clients are in this aspect of the industry. For factors and ABLs it needs to be all about who the end customers are, like large big-name retailers. And then, it becomes the types of contracts written with these retailers and their payment terms.

CONSTRUCTION

Watch out! There is minimal activity going on in the private sector. And with the public works sector, the giant Federal stimulus funds are drawing to a close. Beware of a lot of “white elephant” projects running out of money and government funding agencies pulling out the rug because of their budget deficits. Contractors and subs will be hung out to dry. Remember that construction interests generally have a jaundiced view about factors anyway.

TRANSPORTATION

Some sectors here offer renewed potential. There are more opportunities to factor bills of lading for trucks, especially the small, independents and entrepreneurs. Trucking seems to have stabilized after the economic ground it lost going back three years ago during a period of galloping gasoline price increases and rising insurance costs. This fragile pick up may get destroyed as transportation is beginning to suffer from another fuel crisis. The other transportation mode where more opportunities are opening is private aviation. The past several years, high net worth individuals economized on aviation. In austerity moves, businesses opted to fly commercial instead of private. Nevertheless, activity is coming back involving quality account debtors.

COMPUTER CONSULTING

This sector has evolved into harmonious relationships for many factors during the past decade, especially since a factor is often funding services that have already been provided. While there has been some price pressure on billings and invoices, it is insignificant. The field is stable and holds even more promise.

PRINTING

Major downsizing due to new communication technologies and bankruptcies means severe tests throughout the industry. Factoring and ABL opportunities have been marginalized into niches like printing and publishing through schools, universities, legal, related specialties and quasi-institutional buyers. These are generally good payers, but they take a long time to pay the printers and publishers who are working with factors. Clearly, independent bookstores have been drying up.

The bankruptcy of Borders and the announced distresses suffered by Barnes & Noble have shaken up book publishers and their financiers in this mix. The printers and publishers here got swept away with the euphoric retailing where account debtors like Borders and Barnes & Noble competitively raced to open showcase stores featuring cafes with high-priced beverages, community activities and vast overhead, which had nothing to do with their supposed core, books. Instead of retailing their main product, they were very distracted, wrapped up in selling an experience.

For a long time, lenders have been skeptical of when this strategy would run its course. (I’m a factor who believes that small, basic units focusing on the central product, combined with strong Internet orders still hold a future for publishers and printers.)

CALL CENTERS AND RELATED SERVICE PROVIDERS

I am entertaining deals in this sector. It is important to study the contracts the client has in place governing its sales. Does the enterprise have a decent log of “case studies”? Issues like overhead for hired people and the recent squeeze on margins between pricing and profit must be taken into account. Account debtor quality seems to be all over the map. Therefore, I try to carefully pick and choose.

MANUFACTURING/PRODUCTION

There have been some pick up on opportunities, in particular, if my client is doing good job, paying up front attention to the creditworthiness. A factor can get caught in the crosshairs of disputes between a retailer and his client on policies about acceptance of goods, returns and whether or not there are clear definitions. In some cases, these terms are becoming unreasonable and harsh.

FURNITURE

In last year’s “report card” it was widely agreed that this sector offers little for factors and ABLs because it is almost all overseas. And bankruptcies in the past year like Ethan Allen only add to my negative reaction. If factors and ABLs take the time and patience, there is a small but growing corps of entrepreneurial small business furniture makers. As they grow, they will have financing needs when they start to sell to large retailers. But growing also denotes “growing pains” so these deals can get hairy and require a lot of attention. Still some of these manufacturers may get lucky to catch a quality receivable from a major store. The business model where there is a showcase, and the small manufacturer takes a deposit on a shipping order, defrays cost and provides some insurance on account debtor payments.

AUTO PARTS ACCESSORIES

Factors and ABLs would be wise to take a fresh look at opportunities here. After the bankruptcies and restructuring with some auto manufacturers, this sector appears to be rejuvenated with account debtors that will make proper payments. Manufacturers and distributors selling to manufacturers along with significant after-market retail chains, and opportunities through warranty service contracts now, appear to be decent bets.

BILLING, THIRD-PARTY MEDICAL

For those factors that desire to play in this space, this is an opportunity to feast. There is more government funding that backs up receivables more than at any time in American history. For the foreseeable future, the spigot (Obamacare, Medicare, Medicaid) is gushing.

LAB TESTING

This sector gets associated with third-party medical receivables, and it deserves some checking out. Yes, now there is a much higher degree of oversight and scrutiny by regulators. There is some price pressure on margins. But, labs usually have good consistency on business volume and get paid regularly from their account debtors. The lab you are factoring needs to have competent in-house claims people.

MEDICAL EQUIPMENT

This sector offers prospects for our industry, especially if the device, product or substance gets approval for government reimbursement. This sector is now being driven by enormous product innovation. But it is very tough to gain a selling platform and develop favorable terms on payments among retailers and wholesalers.

There has been some buzz at our latest trade industry seminars about encouraging some of the business owners in these sectors to ship overseas where factors can participate with vehicles like the United States Export-Import Bank. But the buzz has a hollow sound because, by and large, the majority of consumer goods continues to be produced overseas.

As for our latest report card, the grades appear to be better than they were, but much improvement still needs to take place. (If a student was given a failing grade and perhaps, was even left back — would earning a C- or a D+ in this semester look a lot better?) Have commercial finance people been so traumatized and starved that the morsels and crumbs uncovered in sector opportunities appear to be rewarding?

Donald Barrick is the founder and president of RMP Capital Corporation, a nine-year old national factor based in Islandia, NY. The company has offices in Massachusetts, Pennsylvania, South Dakota and Texas. For more information, visit, www.rmpcapital.com.