California Apparel News

The mixed messages about the state of the economy are keeping consumer confidence mercurial and retail sales fluctuating. The labor market remains weak nationwide but first-time unemployment claims have dropped. The dollar is showing signs of weakness, but producer prices are on the rise—indicating that inflation remains flat. California Apparel News editors Nola Sarkisian-Miller and Darryl James polled several finance executives to gauge the current economic climate for the apparel and retail sectors and get their projections for the end of the year.

Ron BossiRegional vice president/middle market Union Bank of California

The apparel industry is tough right now. There’s lots of consolidation, but I don’t think we’re looking differently at it. You can tell when there’s a good deal and a good, solid company—that hasn’t changed. Marginal deals are clearly more difficult. Startup companies are always difficult and that’s been the case last year, three years ago, five years ago. There are fewer requests because there are fewer companies in the marketplace. But, there’s money to be had, and lower interest rates are helping. Most California banks have cleared their loan outstanding balances and are looking to put out new qualified credit. Companies just have to research their options and determine what a bank will do and what factors will do. We all don’t do the same thing.

Nick Susnjar Vice president, business development Summit Financial Resources

From a general standpoint, the economy is very soft and signs of turnaround are slow. That’s having an effect on all segments of the market, apparel included, probably more so because retail is so soft. It’s tough to increase a credit line for customers dealing with retailers. New manufacturers are being scrutinized harder than in the past. It might be harder to get that first line of credit. It’s probably a little easier to get into a situation where upand- coming customers are trying to get to the next level. I’m optimistic that by the third quarter, we’ll start to see signs of a turnaround and we’ll see more decisionmaking in terms of financing alternatives. Right now, there’s a lot of indecisiveness in all industries—company owners are having a hard time making financing decisions. There’s a willingness not to make a decision until they can determine what the future holds for their sales. It’s really having an effect on both the retail/customer side and our wholesaler/client side. This has been a slow year for business generation for most companies. Personally, I’ve seen a 50 percent drop-off. Closing the deals is taking longer and we know our competition is experiencing the same thing. Since it’s industrywide, people are working that much harder to get deals and you’re seeing more price erosion and less underwriting criteria. By taking shortcuts, you might take on a risky proposition. The question has become, do we not take credit write-offs or do we go ahead and put any deal on the books to generate the top line? We’ve decided to manage our portfolio and reduce credit losses by weathering the storm and doing more marketing and lead generation so that when the economy does turn around, we can close deals. We’re trying to set up future paths.

Lee Hirsch President Continental Business Credit Inc.

In terms of [credit] availability, there’s plenty of it to go around. The question is whether or not they qualify for the financing that’s available. The way the marketplace is going, it’s tougher and tougher for manufacturers and importers as the economy continues to weaken. It’s not an issue of money. It’s the financial condition of the business that is dictating what’s happening. Startups that have some capital or existing companies that have shown profitable trends are finding financing options wide open. Those companies that are losing money or are small startups are having more difficulty. In their favor, there are companies out there that have a willingness to finance in all ranges, from startups to those bringing in $10 million in revenues. Right now, interest rates are low and there’s still a reasonable amount of capital out there, so there are no restrictions on capacity to find financing. We’re seeing an uptick in the number of companies looking for deals. Our business is ahead of last year by about 10 percent. The real issue or fear factor is what’s going to be the level of consumer confidence in the next few months. If consumers continue to have doubts and scale back spending, that will put a damper on the manufacturing and apparel communities and lead to more difficult times.

Mitch Cohen Senior Vice President and Western Regional Manager CIT Commercial Services

CIT is a 94-year-old company that provides factoring and financing to companies in good and bad economic times. The apparel industry comprises a large part of our business so we are committed to serving apparel companies in times like these. Based on our company’s new business activity in 2001, demand for factoring and credit protection is as strong as ever. Whenever retail bankruptcies are in the headlines, manufacturers turn to factoring and credit protection. Recently, we have seen an increase in inquiries from manufacturers who have large customer concentrations. They are turning to factoring as a risk management tool to protect their companies against bad debt losses.

Lenders Offer Financing Tips

Bank of America, City National Bank, Union Bank of California, Washington State Mutual and Wells Fargo are among the the 60 financial institutions who have signed on to participate at a financing event designed to pair up lenders with capital seekers.

Money Match LA, offered through the Los Angeles County Economic Development Corp. and KFWB News 980, will take place Sept. 5 from 8:30 a.m. to 3 p.m. at the Los Angeles Convention Center.

At least 500 business owners and representatives are expected to attend the event, according to Corey Carleton, the event’s program manager.

“We’ve heard from businesses that financing is the most daunting thing,” Carleton said. “Most businesses don’t even turn to their own personal banks for loans. They go to places where people don’t know them and they get turned down.”

The event is targeting 3-to5-year-old businesses, including those from apparel, retail, biosciences and other industries, she said. Along with meeting representatives from banks, accounting firms and factors, business owners can attend nine education seminars covering loan options, lender research and international financing. Sessions will also be offered in Chinese, Korean and Spanish.

Those attending are encouraged to bring tax statements from the last two years and other financial records. Upon registration, attendees will fill out a form detailing their company background and event organizers will pair them up with lenders for a free, 30-minute information session. Availability is on a first-come, first-served basis, Carleton said.

“We want businesses to walk out of this with financial tools or a contact to follow up with later,” she said.

Tickets are $45 to attend with lunch included and $35 to attend without lunch. For more information, visit the Web site www.moneymatchla.com or call (213) 236-4868. —Nola Sarkisian-Miller