Monday, July 13, 2009

Bankruptcy for CIT?

The $60 billion finance company, CIT, is negotiating for a government rescue while also having retained bankruptcy counsel.

The outcome is unclear as various press sources report that the US government does not feel that CIT's failure would create a systemic risk to the financial markets. Same conclusion that was reached with Lehman Brothers last fall and the outcome wasn't pretty.

CIT is a major asset based lender to small and medium size businesses offering products including factoring, accounts receivable lending, equipment finance, SBA loans and cash flow loans to a wide variety of industries. Its factoring and accounts receivable loans have been available to companies with revenues as little as $5 million.

Many of these borrowers are probably quite nervous at the moment. While the government may reach the opinion that J.P. Morgan Chase, Wells Fargo and Bank of America can replace CIT in the marketplace in the long run, the short term chaos in the meantime could be significant. These and other asset based lenders could be overwhelmed if the curtain came down on CIT and borrowers had to find replacement lenders on short notice.

Are you a current CIT borrower and worried about your options? Read "Matchmaking for Business Loans" and give me a call!

Tags : CIT Group , CIT , bankruptcy , factoring , accounts receivable loans

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