the tsl interview
Secrets of Success
How did you get into the factoring industry and what are the significant changes
you have seen during your career?
Just as factoring traces its roots to the
textile and apparel industries, so do I.
My career began in the New York credit
department of Milliken & Company, a
large textile company. In 1973, I left
the textile business but stayed in
credit, accepting a position in the credit
department of Manufacturers Hanover
Commercial Corporation (MHCC) and
beginning my career in factoring. MHCC
was a predecessor to CIT’s factoring
company, so I have stayed with the same
company ever since…ensuring credit
quality, delivering growth and driving
revenues for four decades.
My observation is the biggest change
in the factoring industry has been the
consolidation among factors. When
I started in the business, there were
dozens of factoring companies, all
roughly the same size. Over time, many
companies got out of the factoring
business, probably because they could
not achieve economies of scale. Today,
there are just a few, very large, factoring
companies, followed by a few mid-sized
firms. Over the years, I have worked
with my colleagues in identifying and
integrating CIT’s factoring acquisitions.
Among them were the factoring units of
Barclays Commercial Corporation, Heller
Financial, Congress Talcott, GE, HSBC
and Sun Trust.
Most, if not all, retailers saw declines
in sales. Since the factoring industry
is heavily dependent on sales to retail,
it, too, was impacted as annual U.S.
factoring volumes declined. However,
as consumer spending starts to pick up,
we expect that the U.S. factoring volume
will benefit as well.
John Daly, president of CIT
Trade Finance, discusses
CIT’s strategy for 2011, the
lessons factors have learned
during the credit crisis and
the effects CIT Group’s
restructuring have had on
the Trade Finance factoring
What is your strategy for 2011?
As the largest factor in the U.S., our
strategy remains focused on serving our
clients and providing them with credit
protection and financing solutions they
need to grow their businesses, as we did
last year when we expanded our factoring relationship with a leading consumer goods supply chain management company. This new relationship provided
approximately $700 million in additional
annual factored volume for CIT.
How did the factoring industry fare during the economic downturn?
The past couple of years have been
challenging, to say the least, as we
saw consumer confidence decline and
consumers cut back on their spending.
How has CIT differentiated itself in the
Our clients, who have moved from other
factors to CIT, have told us that CIT’s
primary differentiator is our ability to
extend customer credit. We have the
size, the experience and the knowledge
to extend credit to hundreds of thousands of retail customers.
Our credit protection and factoring
services provide the supplier with the
peace of mind that their retail customer is creditworthy. We perform the
credit analysis, underwrite the retail customer’s creditworthiness, collect from
the retailer, and manage the accounts
receivable bookkeeping. This is a form of
outsourcing for the supplier.
Another differentiator is our systems.
We have professionally trained credit