By  on September 19, 2005

NEW YORK — Ongoing consolidation in the industry is changing the retail landscape. Overseas sourcing and advances in technology also are having an impact. As a result, factors, such as Sterling Factors, are working to adapt to these changes as the needs of their clients evolve.

Sterling also has found a sweet spot in the market by targeting smaller-sized companies. John La Lota, executive vice president of Sterling Factors, and Louis Cappelli, chairman of Sterling National Bank, discussed these and other issues, such as how they got their start in the industry, with WWD.

WWD: How is Sterling's business today?

John La Lota: Business is great. It's still a very good and profitable business. We're faced with the same challenges as everybody else. Sterling Factors is affected by the economy, but there is always a need for our service. Companies are always looking for funding or credit protection on their receivables. There will always be new clients and new business opportunities.

WWD: Who is your typical client? What does your typical factoring relationship look like?

J.L.: Our typical client is in the apparel or apparel-related industry. That's really who has used factoring services from the start [of the industry]. Certainly we've diversified, but that's our typical client. The bulk of our client base is in the $2 million to $20 million range, but we do have clients doing up to $90 million [in sales]. The bulk of our business is in that small to midsize range because those are the companies that require more attention. That's why they come to us as opposed to a larger institution where they can get lost in the shuffle.

WWD: What are some of the issues affecting apparel and home goods suppliers in the market?

J.L.: Two of the issues that stand out for me over the years have been consolidation among the major retailers and the shift of production offshore. Most manufacturers have already gone offshore. There are only a small number of domestic manufacturers left. We've had to adapt to the changes and work with our clients so that they can get their goods and continue to operate their business efficiently. You have to see changes coming, you can't react after the fact. The handwriting was on the wall about 10 years ago when we started to see more companies going to the Far East to buy goods.WWD: How does Sterling differentiate itself from other factoring firms?

J.L.: We're on the smaller size of the major factors. We try to work very closely with the client to learn their business, and if we know their business we can react quickly to their needs. We try to be more like a consultant and business partner.

WWD: How did Sterling get into the factoring business?

Louis Cappelli: The parent company was originally organized as an independent company called Standard Factors Corp. that was started in 1932. In 1946, it became a public company. That company has operated right up to today, but there were many business reorganizations — not bankruptcies, but creations of different companies and the purchase of many companies including Sterling National Bank in 1968 by the then Standard Factors Corp. For all intents and purposes, Sterling Factors Corp. started out as the mother company in 1932 and that company is now a subsidiary of the Sterling National Bank.

WWD: How did you end up in the factoring industry?

J.L.: My father was in the apparel industry; he worked on Seventh Avenue. He started in the business on the production side making patterns. I've been familiar with and around the apparel industry since I was a kid. What I love about the factoring industry is that you get to meet so many different people every day, new clients, new products. I learn something new every day because no matter how long I've been in this business, something new always comes up.

L.C.: I started here in 1949 and my employer was Standard Factors Corp. I was engaged as a mail-room boy, when it was politically correct to use that term. I answered an ad in the New York Times for an office boy and was hired on the spot.

WWD: There seems to be some misunderstanding about what factoring is. How would you explain the industry?

J.L.: It's amazing. Factoring is such a simple service and it's the most difficult for people to grasp. We offer two basic services: asset-based financing and accounts-receivable management. What are we doing? We're lending money against your business assets, your receivables and your inventory. What else are we offering? We're also offering you accounts-receivable management services. You're outsourcing your credit and receivables departments. That's it, two basic products.

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