CIT ZEROES IN FACTORING IN B2B ARENA
Byline: Katherine Bowers
LOS ANGELES — CIT Group’s Commercial Services unit — which controls roughly 35 percent of factoring in the U.S., according to industry estimates — has found a niche in the business-to-business e-commerce arena and is rapidly gobbling up market share.
The New York-based firm has inked seven deals in six months with B2B ventures, including Fasturn.com, a Los Angeles-based global sourcing and production management Web site, and Tradeout.com, an auction site for inventory surplus based in Valhalla, N.Y.
Its recent alliance with Edaflow.com makes eight. That Atlanta-based venture is the latest company to fasten ties with CIT, which will provide letters of credit, credit protection and financing secured by receivables for its B2B Web site, Edaflow.com.
“We feel good about our progress,” said Richard V. Romer, an executive vice president in CIT’s Commercial Services Group.
At present, CIT has revenue-sharing agreements and varying levels of integration with each Web site. The ultimate goal is complete integration, so that a relationship between factor and client is initiated and maintained entirely online, Romer explained.
Both Stamford, Conn.-based GE Capital and the Finova Group, with headquarters in Phoenix, could step up as competitors to CIT in striking deals with apparel and textile Web sites, but have not yet courted the B2B players, according to industry observers. Both GE Capital and Finova offer factoring through Fasturn.com’s Web site, but that’s a result of Fasturn.com having approached both companies.
Aaron Peterson, Finova’s vice president of e-commerce, acknowledged he wasn’t aware of any financial service companies besides CIT that are targeting the B2B apparel and textile segment.
Despite CIT’s dominance, Marc Miller, director of business development for Tradeout.com, thinks it’s important for the segment’s Web sites to someday offer a variety of financial services to choose from.
“If there were a Coke and Pepsi in the factoring world, I think we would need to offer our clients the choice,” Miller said. “We don’t want them to feel forced into a single relationship. But we haven’t identified an equal to CIT — or anything close to them.”
In sum, CIT is not only ahead of the finance community, it is now in a position to wield considerable clout in the B2B sector. Along with Fasturn.com, Edaflow.com and Tradeout.com, CIT has fashioned agreements with Textrade.com, ClickTex.com, FTADirect.com, What’sHotNow.com and WholesaleTradeshow.com.
And there’s more.
CIT is currently in talks with a half-dozen apparel and textile sites, to provide similar services, according to Romer.
“Obviously, we are not signing any kind of exclusive arrangements,” Romer said. “We have agreed with the sites that we are not offering any special deals.
“We are keeping the playing field level by charging the same fees for all sites,” he added.
It makes sense for CIT to look for the broadest range of Internet representation as the B2B sector is crowded and it is unclear which players will pull ahead of the pack.
“We expect a roll-up as some of these Web sites come together,” Romer projected. “But we are aligning ourselves with sites backed by quality people, who we consider to be good business partners.”
So how good, exactly, is this niche market?
Romer declined to furnish specific figures, but he did say the 10-person e-commerce team CIT assembled six months ago is already paying for itself.
He added, “Let me put it to you this way: It is already profitable to us.”
Edaflow.com, which has revenue sharing agreements with CIT, will likely share in some of that cash flow. But the most important benefit to Edaflow.com, said Russell Griffin, its vice president of marketing and communications, is the credibility and comfort provided to the Web site’s community of buyers and sellers by the partnership with CIT.
“Factoring services are incredibly important to this industry, and getting a trusted provider is crucial in an online environment where there isn’t that [face-to-face] engagement,” said Griffin.
Edaflow.com’s alliance with CIT will initially consist of posting basic data about CIT on the site, including an e-application for a letter of credit and a link to request further information. “Going forward,” Griffin said, “we’ll have a deeper level of integration.”