Where are our Public Officials, Civic Leaders, and LEGISLATORS????....

Report: The New York Stock Exchange halted trading on shares of CIT Group Inc., the largest factor to the apparel industry. Talks ended late on July 15 without a solution; CIT has been told there is “no appreciable likelihood” of government funding in the near term.

Significance of the Bankruptcy
“It sends a chilling message when the government will bail out Wall Street but then turns its back on the biggest lender to Main Street”. (Cass Johnson, National Council of Textile Organizations). The significance of this situation, and its affect on the design based industries of apparel, furniture, toys, etc., is noticeably absent from the “economic impact” analysis being put forth by the local ‘economic gurus’. Just wait until they are faced with real estate vacancies and increased unemployment!

The ramifications inherent in having the largest factoring firm to the apparel industry go bankrupt are far reaching. In addition to the crippling impact on both manufacturers and retailers, the situation also affects suppliers, service providers, shippers, and, most of all, employment. CIT is responsible for 60% of factoring in the US apparel and footwear industries, therefore bankruptcy has a huge ripple effect.

CIT funds more than a million businesses—many of them are small- or mid-sized companies. In the case of the smaller manufacturers, more than 90% of the business is done with the thousands of U.S. specialty retailers who have one or more outlets. Industry growth has happened because of available factoring; it has been the lifeblood of the creative process.

Industry Reliance on Factors
Manufacturers lose the ability to approve credit for their orders, and with it, the cash advance used to make payments to overseas sources and domestic contractors (even for previously contracted goods), and to pay their vendors and their employees. Working without factoring will be a challenge for the businesses that rely on the 80% advance on the retailer’s invoice to help finance production and manage cash flow.

Without factors, retailers will be required to pay up front and draw down on their own credit lines at a time when credit remains difficult to obtain - or find other ways to finance an order. The availability of credit and cash flows is key right now, and we are coming into the industry’s busy shipping season for ‘back-to-school’, and ‘holiday’ merchandise. The local textile industry is also adversely affected. Textile companies, for their yarn and design suppliers, have relied on CIT to assess the credit, and factor shipments for the manufacturing client base they supply.

Next Steps for Apparel and Retail Industry
Where the industry goes from here is unclear. Among the likely changes will be stricter rules for lending money, more-limited access to credit and increases in lending rates. Cash is king now, for both manufacturer and retailer, but there will be alternative ways to do business. Most alternatives carry their own sets of risks, all of which demand a re-evaluation of accounting procedures, terms and insurance policies.

CFA Actively Seeking Solutions
The California Fashion Association (CFA) will be organizing a series of focused gatherings with industry experts, manufacturers, retailers and other professionals to evaluate options, and explore creative new frameworks for business development. We are not done yet!!!!