Small apparel makers get financing help to expand.

Jerris Greenblat was in a bind.

As president of a small snowboard-apparel company, Bombshell, Greenblat found herself facing the same dilemma that plagues scores of young start-ups: She had more than $1 million worth of purchase orders, but was unable to find financing for her manufacturing costs.

That's where Production Finance International stepped in.

The company, known as PFI, specializes in funding growing but undercapitalized apparel and leisure sports companies. In the case of Bombshell, PFI produced letters of credit to the firm's Hong Kong suppliers, and the Calabasas-based company was able to produce and ship on time.

"In order to grow you need to ship, and you need to ship on time," said Greenblat, a 41-year-old snowboarding enthusiast who founded Bombshell five years ago. "(PFI) allows us to grow."

PFI is hoping to fuel more growth in Southern California. The Spokane, Wash.-based financier on June 1 opened a Los Angeles-area office in Manhattan Beach - its first outside of the Pacific Northwest - in an effort to be closer to the region's large number of youth- and sports-oriented apparel companies.

"There is a real resurgence in fashion down here," said Jeff Bartlett, PFI's regional manager for Southern California. "A lot of companies are really catching fire."

About 20 percent of PFI's clients are based in Southern California. The company plans to boost that number to about 50 percent over the next two years, said John Kubiak, a former ski-wear manufacturer who founded PFI five years ago.

"This is where the opportunity is," Kubiak said. "We've been trying to cover it from Spokane and it has been impossible."

What separates PFI from other apparel industry financiers is its willingness to make loans on the basis of purchase orders.

Most garment firms obtain financing through a practice known as factoring, in which funds are extended on the basis of accounts receivable - that is, after merchandise already has been manufactured and shipped and the firm simply needs funds to continue operating while awaiting payment from its customers.

PFI's clients, on the other hand, need money to get their products manufactured in the first place. Many of them are seasonal businesses, such as skiing or golf firms, which lack the year-round cash flow required by commercial banks and factors.

"Even the banks that specialize in apparel are really wary of seasonal apparel," said Darcy DePoy, president of Cold As Ice Inc., a 5-year-old women's snowboard apparel firm in Costa Mesa, which has been working with PFI for the past three years. "There are a lot difficulties when it comes to a seasonal business."

While a company like Cold As Ice may have stacks of purchase orders, it needs money long before any of its goods have been made or shipped. That makes loaning to the company considerably more risky.

PFI guards against those risks by actually taking title to merchandise it is financing. When the merchandise is completed and shipped, PFI essentially sells it back to its client in exchange for proceeds of the accounts receivable.

PFI also charges more than other lenders - generally a commission of about 2 percent a month. Its deals typically are in the $250,000 to $2.5 million range, and PFI holds onto them for an average of three to four months.

"It's more expensive than a bank," admitted Bartlett. "But typically our clients cannot get that kind of money from any other source."

Indeed, the only other option for young, fast-growing firms is to attract investment from venture capital firms, which have an even higher price tag - an ownership stake in the company.

"(PFI) money is not cheap, but without them, I would have to give up a portion of my business," said DePoy. "It costs a little bit more, but I can remain completely autonomous."

PFI's leisure sports niche may be small, but it is growing fast. The surfing industry alone accounted for $1.35 billion in U.S. sales in 1996 - a 12 percent jump from the year before, according to the Surfing Industry Manufacturing Association, an Orange County trade group.

Other sports, such as snowboarding and skateboarding, also have logged strong worldwide growth in recent years, sparking a wave of young start-up companies, many of them based in Southern California - giving PFI a significant base of potential customers.

"A lot of entrepreneurs may know about design and trends in the industry," said Bartlett, "but they don't know much about the finance side of things."