The apparel industry was an important industry that helped lead to modern factoring. Many aspects of the factoring service such as checking credit on customers and providing collection services arose from the need of the textile companies in England to have agents in the colonies manage these functions for them because of the great geographical distance between England and the colonies. The agents these companies hired and sent to the colonies would purchase the invoices at a discount from the English textile company and then collect the amounts in person when they came due. The agents would gather orders from the merchants in the colonies; approve their credit and then forward the orders to the English textile suppliers. This service they provided added value and efficiency to the entire transaction.

     The face of the modern day apparel transaction looks a little different but also bears some striking resemblances. Much of the apparel consumed in the US today is once again manufactured overseas. Factors are still key agents in the process today. They perform services such as opening letters of credit and funding purchase orders that helps their client get goods shipped to them. They also help with credit and collection services for apparel firms.

     Another similarity that has not changed too much in the apparel business is that many of these firms still have two or three seasonal lines: spring, summer and fall/ winter. The lead time for the current season in retail stores now can be two or three seasons. This means that each season has to be designed, planned, manufactured and shipped many months in advance. This long lead time combined with the fact that retailers generally don’t start to pay for the goods until the goods actually start selling in their stores creates a cashflow gap for the apparel company. Factoring invoices smoothes this cashflow crunch.