JoBeth Tananbaum knows the emerging designer space inside and out. Not only does she herself like to wear designs from up-and-coming talent, but as senior vice president of Capital Business Credit (CBC), the reputable trade finance company and asset-based lender, she focuses on the sector and built a portfolio of talented contemporary fashion designers in New York City. Here, the executive discusses CBC’s involvement in the NYC Fashion Production Fund, how designers can go about securing financing, the importance of domestic manufacturing, and more.
Talk to us about the NYC Fashion Production Fund, your involvement and the value it provides to the industry and especially emerging designer?
Launched in 2014, the NYC Fashion Production Fund (NYCFPF) is a joint venture between Capital Business Credit and the New York City Economic Development Corporation. The NYCFPF was created to support emerging designers based and manufacturing in New York City with financing at below-market rates and more flexible terms than those of traditional lenders. Acceptance into the Fund affords designers many benefits, including access to a loan that has a simple and straightforward fee structure, ability to work with existing and additional lenders and/or factors, and access to mentoring, technical advisors, and networking opportunities with industry experts.
Many fund recipients are amazed at how much they can grow when they have right financing facilities in place and have the mentorship to guide through the finance aspect of running their label so they can focus on the creative, sales and marketing piece.
How important is domestic manufacturing, and what are some of the ways you think it can be revived?
There is tremendous value in domestic manufacturing, not just for the City (i.e. creating jobs and increasing trade), but for young designers learning the ropes of development, production and manufacturing. The ability to see each stage of the manufacturing process first-hand allows brands to control the production process and ensure the quality of the goods is meeting expectations. Additionally, as order lead times continue to shrink, being able to produce and ship goods from American soil can give brands a leg up with major retailers.
While the garment district continues to be the premier location for the most talented pattern makers and factories, what we are seeing is a move to the outer boroughs, where less expensive real estate allows for large facilities to better accommodate modern machinery and methods. To keep manufacturing local, it is critical that New York not only support existing talent but nurture the next generation of skilled workers able to produce the quality of dress we have come to expect from companies ranging from Oscar De La Rental to even new brands like The Row or Rosie Assoulin.
In addition, it is critical that New York and the rest of the U.S. remain current with the most modern techniques for manufacturing and development. That means everything from laser-cutting to smart technology.
The U.S. must be able to meet the growing needs of an educated and demanding consumer who not only wants ethically designed and created clothing, but also clothing able to work for them with new and unique technological features.
What are the best ways for emerging designers to secure financing?
When the Fund is deciding to finance a young brand, the first thing we look for is not necessarily how talented of a designer he or she is, but how knowledgeable he or she is about the ins and outs of his or her business. We look for a clear understanding of the company’s financials, customers and plan for growth.
Whether the designer himself is keeping his/her books and records and managing his/her finances or he/she has outsourced it to a part time controller or family member, I want to see that the designer understands that fashion is first and foremost a business. Another thing I am often asked about is profitability.
I would say that showing a profit in the beginning of a business is not necessary to secure financing. I personally don’t expect young brands to be turning a profit in the first year or even few years of business, but I do expect them to have a plan to be profitable down the line.
How important are factors to designers looking to build a business?
Factors are a tremendous resource for young brands. They offer relatively easy access to cash in a business that is very working-capital intensive. Since designers are always in some stage of development and production, being able to borrow immediately upon shipment in the case of traditional factoring, or in advance of shipping as in the case of PO financing, provides brands with the assurance that they have the funds necessary to deliver timely on their purchase orders. In addition, factoring provides necessary cash to growing businesses without taking any equity stake. With working capital, businesses that are correctly handling their financing can use the immediate access to cash against their receivables to pay their vendors, keep on their lights, and continue development for their next season all before their net 30/60 terms have expired.
You have come to an established family business—what have you brought to the business and overall sector?
I am a third generation factor. My grandfather started his original factoring business with his brothers in the 1940’s and my father joined in the 80’s after working in law and international finance. While the original family business was sold to Wells Fargo Bank in the late 1990s, my father remained in the industry by buying Capital Business Credit (CBC). I have a profound respect for my family’s legacy in this space, but I also want to bring a fresh take on an industry that at its core has remained relatively unchanged. With that said, I have aggressively reignited our fashion portfolio by offering a la cart lending packages to brands doing anywhere from $500,000 in business to $40 million. Because CBC is able to do more than just traditional receivable lending such as inventory financing, trade finance and asset based lending I have been able to combine my passion for fashion and my understanding of lending, and spread the word of our unique products to a new generation of designers, manufacturers and importers. I think it is tremendously helpful for a brand of any size to sit across from someone who not only believes in and understands your business, but is a consumer of the goods that you produce.
What is the one advice that you have for designers, both emerging and established?
My father always says, “I don’t care where you are going to be six years from now, I care where you are going to be six weeks from now.” Unpacking that a little, it’s not that we as factors don’t want to be working with companies projecting for a successful future, but a five-year plan is nothing if you don’t know how you are turning on your lights next week, or if you haven’t booked new orders for the coming season. In the end, every great business plan is one that not only secures a successful tomorrow, but is also productive today. So, remember to always be overly cautious with your cash, of your relationships and of your projections, because a young business that is continually under-promising and over-delivering will quickly become a very large business with opportunities for even greater growth.
