Industry Focus: Finance—How Can Factoring Services Aid Apparel-Business Recovery?

Entering 2021, the apparel industry can see a bit of hope as businesses look toward maintenance and recovery from a tumultuous year. As apparel businesses examine their next steps while outlining new financial plans, they often look fevery business that needs it. For apparel-industry businesses, factors—financial agents that serve as lenders through purchasing a company’s invoices—serve as an additional option, especially during challenging times.

To explore these financial-support options, California Apparel News asked finance-industry experts: How can factoring services aid apparel-business recovery from the tumult of 2020 throughout 2021, and what challenges can factor options help companies overcome?

Darrin Beer

Western Regional Manager

CIT Commercial Services

As we enter 2021, apparel companies face many of the same challenges seen throughout 2020, including the ever-changing bricks-and-mortar retail landscape, the shift in consumer-buying preferences, the migration to online purchasing and the continuing COVID-19 pandemic. In-person shopping will not go away, but many retailers must continue adjusting their store footprints to balance both forms of consumer spending.

Typically, apparel companies use a factor to support financing needs in difficult times and to finance growth and seasonality. In addition, companies look to a factor to help them navigate the retail landscape by underwriting the creditworthiness of their customers.

The best factors can provide clients with industry knowledge derived from decades of experience in servicing a diverse apparel-client base. Financing, credit protection and collections are important, but having a capable adviser to help navigate the fluctuations in this environment is arguably even more important. A strong relationship between the factor and the client sets the stage for even better collaboration.

For instance, based on prior and recent stay-at-home mandates, many clients have made investments to improve their wholesale and online distribution channels. In such cases, an experienced and flexible factor can provide the right financing. Additionally, it’s important to navigate today’s retail climate and utilize a factor’s services to underwrite and promptly collect accounts receivable in order to mitigate bad debt. These are powerful examples of how a factor can add value and help apparel companies remain competitive in 2021 and beyond.

Mark Bienstock

Managing Director

Express Trade Capital

Factoring services can be a true lifeline for many apparel-related companies. With the number of recent bankruptcies and those retailers that are still struggling, the ability to have credit coverage is potentially priceless. Additionally, with most manufacturers having concentrated receivables, the ability to access immediate cash flow against their receivables is critical in moving the sales process along. Purchase-order financing, which can be supplemented with most factoring facilities, provides additional liquidity when orders become too large for a manufacturer to handle by itself. Lastly, the factor provides a very important knowledge-bank service of up-to-the-minute industry developments, news and trends that can be instrumental to the well-being of the client.

Sydnee Breuer

Executive Vice President, Western Region Manager

Rosenthal & Rosenthal

Certainly 2020 was a very tumultuous year. Interestingly, like many challenging periods, the year was not uniformly bad for all businesses nor even for all apparel businesses. While men’s suits and ladies’ dresses struggled, athleisure and casual-apparel companies were a bright spot, with some even performing better in 2020 than in prior years. And those scraps of fabric that had been tossed aside are now revenue-producing, as many apparel companies pivoted to add masks to their product offerings.

Just as wholesalers, importers and manufacturers weren’t uniformly impacted, the same was true for retail. Those designated as essential businesses or with e-commerce platforms firmly in place fared better. Others struggled with more-restrictive requirements from overseas suppliers and had difficulty getting product shipped internationally at a fair price—and in some cases even at all.

Navigating the credit minefield—something that is unpredictable at best even in non-pandemic years—was also challenging. During the pandemic, our factored clients have been relieved to know that Rosenthal continues to work with the retail trade, analyzing current financial results as they become available and assessing credit risk in order to credit-protect receivables. In fact, as credit-insurance companies were reducing a vast number of credit lines, especially on retailers, we were getting calls from the insureds looking for alternative credit-protection mechanisms. This led to a robust year for Rosenthal’s own business.

Additionally, since we also collect the receivables, Rosenthal was able to use the leverage we have to collect faster than our clients couldon their own. This is critical when retailers’ cash flow is tight and they need to ration the cash and payments.

On the subject of tight cash flow, we also provided lending services to our clients via factoring, purchase-order supply-chain financing and asset-based lending arrangements. Banks are stricter with their lending criteria and typically cannot work with companies showing losses even if due to a global pandemic. Nor do bank lines grow as quickly as a growing business’s cash flow often requires. As an independent, third-generation family-owned business, Rosenthal understands the multitude of challenges our clients have been facing and how those challenges have impacted their cash-flow needs.

Gino Clark

Executive Vice President and Managing Director of Originations

White Oak Commercial Finance, LLC

As apparel companies regain their footing in 2021, their management of budget, inventory and accounts receivable will be vital to recovery. In this environment, factoring is a smart financing solution for companies to leverage their existing assets and take advantage of new opportunities. When factoring is used in conjunction with other lending products that leverage inventory, intellectual property and real estate, it provides a long-term working-capital strategy that can scale with a business at every stage.

The comprehensive financing that factoring offers can remedy some of the most-pressing challenges consumer-facing companies may experience this year: managing counterparty risk in the customer base with longer terms, smoothing out supply-chain disruptions and expanding distribution channels into e-commerce. With deep roots in the apparel industry, we understand that factoring is more than a seasonal funding solution and requires a long-term partnership that provides companies with a platform for success.

For middle-market apparel companies to sustain growth as well as weather future market headwinds, they need customized solutions from industry experts that take the time to understand their unique challenges and can provide fast liquidity, certainty-to-close and scalable funding at high-dollar ranges.

As staffing reductions have constrained apparel-company resources, factoring with White Oak allows them to streamline their operations and save time and money by outsourcing back-office collection duties. Businesses can choose to do so on a non-notification basis to maintain control over their customer relationships, thereby allowing them to remain focused on product development and unlocking opportunities.

Eric Fisch

Senior Vice President—National Sector Head for Retail and Apparel


Factoring-and-receivables financing has provided integral services for the apparel industry for decades. The value of this service is never clearer than in times of disruption as we have experienced this past year. With numerous retailers filing for bankruptcy and many others under stress, having credit protection on your company’s accounts receivables is a way of limiting exposure and protecting your business when it needs it the most.

As we—hopefully!—approach a recovery, some companies will view this as an opportunity to reduce or forego this type of coverage. While each situation is unique, factoring provides important real-time information on the retail market throughout the economic cycle.

Understanding the coverage limits and costs for covering any individual retailer can be an early warning to a wholesaler on a potential future problem. While immediate protection of factoring is on sales already invoiced, the larger strategic benefit is for a seller to consider future programs and where to dedicate resources for expansion. These decisions can benefit from any signs of weakness in a key customer.

Rob Greenspan

President and Chief Executive Officer

Greenspan Consult, Inc.

There had been many changes in the wholesale, retail and e-commerce environments before the COVID-19 pandemic. Market shifts were taking place with e-commerce business continuing to grow. The retail landscape was changing due to the shift to e-commerce resulting in many retailers, including major, specialty and mom-and-pop stores, being forced into bankruptcy. Wholesale business was getting more difficult as a result of these market shifts.

The COVID-19 pandemic just forced a more-rapid acceleration of these market changes with regard to retail overall and incredibly speeding up the process of consumers buying more and more apparel through e-commerce sites. The result of these rapid changes has impacted the apparel industry.

There are ways factoring companies can continue to help serve their apparel clients. First, though it is becoming more difficult, is to continue to approve the credit of the retailers. By doing so, the factored apparel companies will not have responsibility for any bad debts or credit losses from their retail customers if there are not any disputes on the invoices. Apparel companies should not be in the business of granting credit to retailers. Find a factor who can do that for you.

Another way the factor is immensely helpful is on the lending side. The factor will advance or lend money to the apparel company based upon their shipments to approved customers. So, the apparel company can borrow up to 80 percent or sometimes more of the unpaid accounts receivables. This will provide daily cash flow into the company.

Inventory can also serve as another form of factor financing. Depending upon your financial position, cash flow needs and other issues, the factor will advance usually up to 50 percent of eligible inventory. This will provide additional cash flow into the company. So, by being factored, the apparel company can get cash flow up on accounts receivable and inventory.

Sometimes apparel manufacturers face additional cash requirements based upon constraints by their retailer or e-commerce customers. The factor can help with these types of challenges by providing temporary over-advances of funds to help the manufacturer or importer get through issues of goods being delayed in shipping, a temporary buildup of inventory or other types of retail requests that prolong shipments going out the door.

Richard Kwon

Executive Vice President and Portfolio Manager

Finance One, Inc.

While the COVID-19 vaccines are finally available, the economic activity will not return to pre-pandemic form in the short term. Online sales will continue to be the growth driver for apparel retail as there were more than 12,000 store closings by major chains in 2020.

For the apparel manufacturer and importer clients, factors can review the portfolio of current and prospective accounts from a credit-risk perspective and provide guidance and credit protections. In the continuously shifting retail landscape, a company should always seek updated information on its customers before deciding to invest its resources in developing samples and follow up on orders.

A well-established, full-service factoring company can streamline its clients’ credit-risk mitigation, financing and effective A/R management. Along with primary functions as a factoring company, Finance One identifies our clients’ business needs, such as finding a new supplier, buyer, logistics solution, and assist them with finding the best solutions possible. The key is to have consistent and diligent communication with our clients and combine our efforts to navigate the business toward recovery.

Robert Meyers


Republic Business Credit, LLC

Without stating the obvious, 2021 provides the opportunity to examine your business model going forward. For many apparel manufacturers, 2020 and now into 2021 will be forever remembered as the most reactive period of entrepreneurship. Those forced reactions occurred with stakeholders, lenders, supply chains, customers and how to pivot with the various onslaught of inputs during the year. 2021 presents an opportunity to be more proactive as apparel brands reevaluate their business models for the year.

We recommend that brands evaluate three key decisions with their factoring companies as part of their overall strategy in 2021. Firstly, factoring companies provide unrivaled insight into the creditworthiness of available wholesale channels. Secondly, factoring companies provide a barometer of industry trends on retailer terms, discounts and returns. Thirdly, evaluate how the factoring company can support the overwhelming requirement for an e-commerce strategy. At Republic, our clients regularly discuss ideas and best practices as they refine the best approach with their target customers.

Our partnership with brands often extends beyond just funding receivables. Regularly we provide additional funding on e-commerce, merchant and inventory facilities. The conversations for 2021 should be where you are going and making sure you have a funding partner that can support your strategy. We are excited about the developments and trends that will emerge throughout the apparel community in 2021.

David M. Reza

Senior Vice President, Western Region

Milberg Factors, Inc.

Factoring has always been and will continue to be a service that can help a company to thrive in both bull- and bear-market environments. Last year was a stern test for all resources serving the retail-sector supply chain, including factors. Now, as the industry recovers from the disruption of 2020, factors will continue to prove their value by providing their traditional core products such as debtor-risk coverage and third-party accounts-receivable management. The recent rash of high-profile retail failures underscores the value of third-party credit protection and accounts-receivable management.

Of course, these services are often coupled with working-capital and trade-financing tools that are specifically designed to help apparel companies deal with everyday challenges such as seasonal cash-flow needs, customer-delivery pushbacks, vendor-credit issues and product development. Further, in cases where a factor may only be providing credit coverage and collections to a client, our presence and expertise often provide comfort to banks that are lending to apparel companies.

Factors are risk-management and financing resources. While we are not consultants, we can be consultative. Over the years we have seen many clients negotiate their way through difficult market conditions. In addition to delivering our core products and services, we can—and do—share many best practices among our clients that will help them navigate these uncharted waters.

Kevin M. Sullivan

Executive Vice President, Wells Fargo Commercial Services

Wells Fargo

It’s pretty clear that 2020 was a year in which factoring services proved to be a vital tool for apparel companies. We essentially witnessed 10 years of change crammed into a 10-month period, which resulted in a sizable increase in retail bankruptcies. The consumer shift toward direct-to-consumer purchases at the expense of bricks-and-mortar retailers was pronounced and doesn’t appear to be a temporary trend. Companies that were able to rely on the support of factors found that, in spite of the significant increase in retail insolvencies, they were able to move forward because of the credit coverage provided by their factors.

While it was a concern that a company might have lost two or three sizable customers, they were paid out on receivables that would otherwise have been customer-credit charge-offs. Companies that did not utilize the services of a factor were now faced with the double-edged issue of losing valued customers and absorbing potentially large write-offs.

With the continued restrictions related to COVID-19, as we’ve entered 2021, there is little doubt that the retail landscape remains somewhat challenged. While many retailers were able to benefit from an already-robust direct-to-consumer business that increased as a result of COVID-19, those who didn’t have those capabilities have, in some cases, continued to struggle. Now more than ever it’s important for an apparel company to have a financial partner who can not only provide liquidity in the form of lending facilities but also provide factoring services that allow the company to be better informed about the credit status of their customers while at the same time providing credit insurance on accounts receivable in the event that bankruptcies continue in 2021.

Another important benefit of factoring relates to the collection-and-cash-application services that a factor offers. Every apparel company in 2020 was forced to take a serious look at head count and efficiency. A factor enables an apparel company to essentially outsource functions that would otherwise represent additional expense to the company if they chose to manage these functions on their own. We’ve been approached by companies over the last year or so who had never previously considered factoring and now consider it a vital service, given the uncertainty that 2020 produced. The benefit that a bank such as Wells Fargo has is the ability to tailor these programs to whatever a client seeks. We can provide advance-factoring facilities that feature credit, collection and cash-application capabilities along with advances against receivables and inventory. We can also provide what’s referred to as collection-factoring facilities, which feature credit, collection and cash-application services without any lending facility attached. In either case, a company can be confident in the fact that credit-approved accounts receivable are backed by Wells Fargo. Should a company choose not to utilize factoring, we can also provide asset-based lending facilities that do not have a factoring component. Given the uncertainties of today’s marketplace, we’re definitely seeing more companies express an interest in factoring services as we move into 2021.

Ken Wengrod

Finance Committee Chair

District Export Council of Southern California

Gathering and understanding real-time company data in today’s environment is crucial in making effective business decisions. Companies may benefit from collecting real-time data from their customers by asking the following questions: Does the customer have the ability to pay their bills in a timely manner?, What’s their cash availability?, Is the customer paying their suppliers on time?, Are they requesting extended terms?, Are chargebacks increasing?, Are their online sales significant? and Are their stores even open?

Despite their reluctance to share these details, companies should be requesting these data from their customers and factors. Maintaining and expanding relationships with their customers is vital rather than limiting it to merchandisers and buyers and accounts payable. The company should take notice and refrain from being overly aggressive on the sales side when the factor is not approving an account.

Factors can assist the apparel companies with increased availability to properly match their trade terms. Negotiating with the suppliers for increased terms is yet another avenue for companies to consider during these uncharted times. Retailers are offering their own supply-chain financing programs with very competitive terms, which companies can explore. Expansion of their factoring facilities is recommended for growth, not to cover losses. Exploring new ways to expand sales to good-credit customers and reducing unnecessary overhead and inventory are fundamental to flourishing.

Companies need to broaden their customer base. Now is a critical time to expand exports. The weakened dollar makes U.S. exports far more competitive, with 95 percent of potential customers outside U.S. borders.

Staying on top of customer credit and collection matters and not being solely reliant upon the factor are advantageous steps to take to overcome business challenges in the days ahead.

Adam Winters

President and CEO

Merchant Financial

2020 was certainly a challenging year on all levels. Businesses were, of course, greatly impacted by the pandemic. As retail shut down, many of our clients began importing PPE. This was significant as clients were able to ship goods during a time when retailers were closed. Merchant provided an enormous amount of purchase-order financing in order to help our clients achieve these sales.

As business begins to recover, it is paramount for companies to have a factor in their corner that is willing to approve credit while in difficult market conditions. We have seen a surge in retail bankruptcies over the past year, yet we are still out there approving those tough credits.

We strongly believe that we will see an increase in apparel sales as the economy improves over the next 12 months. Having a favorable factoring or asset-based-lending facility will give businesses the flexibility to take advantage of new opportunities. We at Merchant don’t believe that one size fits all when it comes to financing. Whether you’re a DTC business, a traditional business selling to retail or an omni-channel brand, structuring a facility suited to your specific business needs is paramount. or guidance from experts.

While hope is on the horizon as COVID-19 vaccines continue to be administered across the country, there remain areas in which pandemic activity continues to be high, affecting citizens across the United States and businesses that still grapple with residual effects of stay-at-home orders and the challenges of meeting financial obligations. While government aid has been available, it has not been substantial enough to salvage many companies’ full operations, nor has it reached