ABFJ: You’ve been in the financial industry more than 40 years. What led you to enter the business?
It was June of 1970. I had graduated from Queens College, and I started to look for a job. I had one woolen navy blue suit that I had on during a heat wave. I was supposed to meet my father at 5 p.m. and had a few hours to kill. I walked into an office building to cool off.
I took the elevator up a few floors, stepped off, saw a restroom, and went in and washed up. There were some chairs outside so I sat down. I had no idea what office I was in but somebody came over to me and said, ‘Are you here for a job?’ I said, ‘Okay.’ They gave me an application. I filled it out. They said, ‘Do you want to go into credit or sales?’ Since I wanted to be in the business world, I took the interview. They called me back for a second interview, where I met the big boss. He said, ‘When can you start?’ I said, ‘This afternoon.’ I spent seven years learning the textile apparel and home furnishing industries.
I moved to a factoring company owned by Chase Manhattan Bank. They were sold and sold again until I landed at Republic National Bank. Over time, I ended up becoming the regional manager. They were bought by HSBC, which had factoring companies all over the world, and I got a good flavor for the global vision.
In 2003, they opted to sell the factoring business, and John Daly from CIT invited me to lunch. I had known John for probably 30 years. He said to me, ‘It’s really important for me to know that you will join us before I make my offer.’
I told John that three things were important: That CIT take care of the clients, CIT take care of the people and be reasonably fair to me. He did all of the above. John Daly is one of the smartest people I’ve ever worked with. It was a great acquisition for CIT — the company got their premium back in less than a year and they didn’t lose any business to the competition.
ABFJ: How did CIT Commercial Services begin? How does the business fit into the overall product delivery system at CIT?
CIT Commercial Services has been around for over 100 years. It’s one of the leading factoring companies in the U.S. It services the apparel, accessory, footwear, home goods and furniture industries along with consumer electronics and housewares. It’s a large producer of fee income, which fits perfectly into banks, and it’s an integral part of CIT Group.
ABFJ: CIT Commercial Services began by providing factoring products to the garment industry. How and why has the product expanded into other areas?
Factoring products have been evolving from U.S. companies producing their products domestically to companies importing from different parts of the world, especially Asia. We are experts in products that go into the consumer distribution world. If you walk into a retailer of consumer products goods, you will see multiple products that we can provide financing and credit protection for, such as apparel, electronics, housewares, hardware and toys. We’re experts in those industries. We know how the goods are produced, the entire sourcing cycle and the customers who buy them. It’s only natural that we’re able to expand our business from apparel into other parts of the consumer distribution area.
ABFJ: Are there other areas targeted for further expansion?
We may be interested in expanding into the factoring of staffing receivables, government receivables and transportation receivables. We have a supply chain finance product, as well as a receivable exposure management product that can bring value to any company in many industries. The last area that’s of significant potential growth for us is our international factoring business, which provides credit protection for products coming into the U.S. and for companies that are exporting products to Asia, Europe and South America. We have the ability to give them credit protection and finance those receivables.
ABFJ: Are there specific challenges that you foresee as you take the reins of Commercial Services?
The economy is always a challenge. The evolution in the retail market is another challenge, including issues such as major retailers closing some stores, some looking to make major investments in e-commerce, potential consolidations and, on top of all that, we have a consumer that has changed their buying model. We don’t think that brick and mortar will go away, but we do believe that the retailer is going through a complete evolution and has to adapt to it. As they adapt, we will have to adapt to those changes to provide servicing and financing in this new model.
ABFJ: As an executive at a major commercial bank, what is the impact of being more highly regulated than a non-bank specialty lender?
Before I answer, I think it’s important to know we have lived on both sides. I think the market was significantly different when we were part of a finance company. There were a lot more opportunities. It was a bigger growth market. I think today it’s a smaller growth market. So, we’re now a regulated entity. We’ve converted. We’ve learned the rules. I think that it makes the portfolio management easier because your clients are generally stronger financially, which means you are not as worried about a big client’s potential loss. We’re seeing stronger clients that are buyers of other companies. We also see strong entrepreneurs and strong public companies rather than highly-leveraged entities that create concern when the market changes. In my past at Republic National Bank and HSBC, our model then was the same as today — service and relationships.
ABFJ: Is that a competitive advantage over non-regulated entities or a disadvantage?
I would say the advantage that we have is that a large portion of our client base consists of buyers, which is good. The disadvantage is there are some deals we may have done in the past, smaller ones, that don’t fit the bank model. However, if we think that those deals should be done, we have the ability to work with our risk people to get the deal done as long as we’re well collateralized.
ABFJ: Where do you see the factoring business unfolding, and what are your expectations going into 2016?
I think that if the economy or retail dips a bit and retailers begin to have some financial issues, our business becomes more valuable for the credit protection and financing we offer.
I think factoring is one of the most undervalued finance products globally. Having been at meetings with factoring companies from all over the world, they all agree. We’re probably the worst marketed finance product. If you visited our Danville operation and saw what it does, you would find that we’re probably undercharging for this incredible service that many people scoff at or take for granted. I think we have to build that and continue to look at technology upgrades to make sure that we’re at the forefront of the game.
ABFJ: What are some defining moments in your career?
I went from servicing domestic producers to learning and understanding importers and how that differs. I think in the domestic world, companies didn’t need very much capital because they would buy their products on open terms. They would factor the receivable, receive the money immediately and then they would pay down their accounts payable and their vendors.
Over time, production moved overseas, with purchases supported by letters of credit and the lenders had the entire financing package. That again morphed into continuing to be overseas and instead of utilizing letters of credit, overseas became open terms. And so, although it took longer for the goods to get here, we once again had a financing model where we really didn’t have to have this overleveraged support.
We’ve seen hundreds of retailers disappear through bankruptcies and acquisitions. It’s sort of like the banking industry. How many banks are now part of JP Morgan Chase? How many retailers are part of Macy’s? And so, all of these customers for our clients kind of disappeared. Our clients have learned how to deal with that. They’ve become smarter and more efficient and flexible.
The market has changed significantly. The lenders have become more sophisticated, and I would say that we’re going to go through the next change, which is really the change in the retail environment being created by millennials.
I have a daughter who is a shopper, a wife, a mother and an entrepreneur, who loves retail and who worked in the apparel world. She buys everything online — from groceries, to paper towels, to clothes. We have to figure out how to anticipate our clients’ needs as the model changes. I believe if we sit back and wait, it may be too late. And, of course, the factoring industry went from probably 50 factoring companies servicing the same market to basically four or five servicing that same market today. So it’s a different world.
ABFJ: Tell us about your mentors along the way.
When I started, I worked for a credit manager named Frank Perrotta, who was one of the funniest and smartest men I’ve known. I didn’t understand 50% of what he said. But, I read him well, and he was great.
I then worked for a gentleman named David Goldberg who was well ahead of the curve on international growth, and was way ahead of the industries in the late 1970s.
When I got to Republic, I learned a lot from George Wendler, who became the chief credit officer and vice chairman of Republic National Bank. I have the highest respect in the world for George.
And then I met a guy by the name of John Daly. John is probably one of the brightest leaders of a company I’ve ever met. He understood the financials and the clients through and through. He had it all and had a very strong team supporting him. With all due respect to everyone, I’ve been helped along the way and John is one of the smartest people I’ve worked for.
And then I worked for Jon Lucas, who I like to describe as a man’s man. He’s a terrific guy and a dear friend and is tops at building relationships. I’ll miss him dearly because not only is he bright, but he’s a great guy.
Personally, I find this business extremely interesting and a lot of fun, even after 45 years. I’m still learning something new nearly every day. I’m extremely proud of the tremendous relationships I’ve built not only with my fellow employees along the way, but also with the thousands of companies we’ve worked with over the decades, as well as the referral sources. My clients have indicated they trust me on a deep level and they know that if they have business questions, I can be reached seven days a week, 24 hours a day. I think having that value to your clients in the world that we live in today is extremely important.