As expected for a long time now, CIT filed for bankruptcy yesterday. This is huge for small and medium sized businesses in USA as Reuters reports “CIT failure to leave small businesses floundering”:
The company’s long-term prospects are uncertain and the bankruptcy could leave more than one million small and medium-sized businesses looking for another source of funding, lawyers said.
“This could have a devastating effect,” said Jerry Reisman, a partner at law firm Reisman Peirez & Reisman in Garden City, New York, who has been working with many of CIT’s factoring clients.
These clients — about 2,000 small companies — are in a particular bind when it comes to finding alternative financing since CIT is by far the biggest provider of factoring services.
CIT’s factoring business, worth about $42 billion in 2008, is estimated to be at least five times the size of its closest competitor, Wells Fargo & Co (WFC.N), followed by other smaller companies such as GMAC Inc and Rosenthal & Rosenthal. It is not clear if these rivals have enough capacity to take on all of CIT’s existing customers.
