First of all, who the hell is CIT Group and why are we paying so much attention to them? This is one of the beautiful side-benefits of the current economic woes – we are finding out who controls the money and credit in this country. Who would have ever expected that AIG is an economic linchpin of the U.S. economy? Not until their involvement in the so-called toxic assets did I have a clue that AIG did anything but provide insurance.
Now we are finding out that there are hundreds of companies that will be in big trouble if anything happens to CIT Group. Why? Because CIT is one of the largest receivables factoring agents in the U.S. As a matter of fact, an article in the Los Angeles Times about CIT indicates that a whole pile of companies that supply Target and Walmart will be in deep doodoo if CIT declares bankruptcy. CIT keeps many of these manufacturers afloat with invoice factoring and some major retailers will suffer if CIT isn’t there to keep the cash flowing.
Another thing that I learned about CIT is that they are heavily involved in the home furnishings industry. I was a former marketing manager in this industry and really had no idea that CIT was a player. But, according to Furniture Today, a lot of domestic furniture manufacturers rely on CIT for factoring services and financial problems for CIT mean financial problems for the home furnishings industry.
As I’ve said, the economic problems we are facing have plopped factoring squarely in the spotlight as a critical financing resource. Too bad that so much damage is being done as awareness grows.