We hear a lot these days about companies that are too big to fail. Appears that CIT is not too big to fail but is too big to go into bankruptcy without causing a lot of chaos for its factoring clients. (Image courtesy of European Pressphoto Agency)

According to an article in the Wall Street Journal online edition, the

upcoming restructuring and likely bankruptcy of CIT may have a serious impact on the thousands of small-to-medium size companies that make up the factoring client base of CIT. The reason? Cash flow.

Apparently, the very issue that receivables factoring is designed to address is the problem CIT may have after restructuring. After all, invoice factoring for small businesses provides the cash flow that would not be forthcoming quickly after invoices are issued. If CIT doesn’t have cash after settling with its debtors, then how can it purchase the invoices of its factoring clients and provide the needed cash?

There is something utterly ironic here, don’t you think? So who factors for the factors?