CIT's Bankrupty Filing Seems Inevitable

Unless a white knight arrives, CIT's bankruptcy filing is inevitable. Small businesses affected by CIT should seek alternative financing to ensure their survival. Getting a business bank loan is literally impossible in the current environment and it takes too long. If your company is starving for cash, consider invoice factoring. The application process is short - most factors have a 1 to 2 page application and the approval process is usually a few days vs. bank loans which can be 30 to 45 days or more. Contact ACD Financial Services (http://www.acdfinancial.com/) if you need cash now to keep your business operating.

from Inc.com

CIT Group, the nation's largest commercial lender that provides loans to roughly a million small and mid-size businesses, is facing the possibility of failure after being denied a second round of government bailout money. Last week, CIT received the bad news that the Federal Deposit Insurance Corporation would not provide the company some relief by granting access to its debt guarantee program.
"We have a comprehensive and aggressive strategy to restore stability to the financial system," the Treasury said in a statement. "Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies." Last Wednesday, CIT issued a brief statement announcing that there was "no appreciable likelihood of additional government support being provided over the near term."
For small businesses with loans from CIT this could spell disaster, but analysts don't suspect the ripple effect will be big enough to warrant government intervention. Some customers began drawing on their credit lines last week, adding to an already mounting pressure onto the endangered company. Dr. Kim Jones of the Stoney Brook Veterinary Hospital in Lebanon, N.H., took out a $1.3 million loan from CIT in June 2008. "I don't know what it will do to me," she says, "they have to do something, the money has been spent, the money is done."
Unless a buyer quickly surfaces, the century-old lender could be heading for bankruptcy, despite the $2.33 billion taxpayer-financed bailout they received last December. "Earlier in the year, when the other big banks were having trouble, I asked my contact person if I should be concerned," Jones says, "and she replied that CIT had plenty of liquidity. Now I don't know."

CIT's Woes Prompt Surge In Activity At Receivables Exchange

ACD Financial Services is a member of The Receivables Exchange which was the subject of a very favorable article in the Wall Street Journal. Contact us at www.ACDFinancial.com or 678-565-9870 to learn more about invoice factoring and The Receivables Exchange.

ACD Financial Services Alternative Financing for Small Business ACDFinancial.com 678-565-9870

Wall Street Journal

By Jacob Bunge

Of DOW JONES NEWSWIRES

CHICAGO (Dow Jones)--The turmoil surrounding finance giant CIT Group Inc. (CIT) is driving a surge in new business for a New Orleans-based company that runs a market in receivables.

The Receivables Exchange, which lets small- and mid-sized companies auction their accounts receivable to buyers that include hedge funds and commercial banks, on Wednesday recorded its busiest day ever and is fielding a flood of calls from businesses searching for financing alternatives.

"These people want to do their own underwriting and do their own credit determination," said Justin Brownhill, co-founder and chief executive of The Receivables Exchange, or TRE.

Events this week have shown that "they can't rely on others like CIT to do it," Brownhill said.

New York-based CIT, among the biggest U.S. lenders to small and mid-sized businesses, disclosed this week that it could face bankruptcy and won't be able to get help from the U.S. government.

The company is among the biggest names in the factoring marketplace, a $125 billion sector that functions as a middleman for short-term financing - paying vendors for goods up front and collecting full payment from retailers later.

Factors extend credit to many businesses that don't have the capitalization or credit rating to do business with traditional lenders.

CIT did $42.2 billion in factoring business last year; faced with the possible failure of a major credit provider, small and mid-sized businesses are now scrambling for short-term financing alternatives in an already tight credit market.

The Receivables Exchange, which opened for business in January, is positioning itself as a new option.

"When you think about somebody like CIT, they're a single point of failure, and we have a market-based solution that brings all these sources of funding together at an auction," said Brownhill.

The company's electronic market model, which resembles that of eBay Inc. (EBAY), lets businesses such as vendors sell their short-term debt at auction and generate cash quickly, while buyers earn a profit when the debt is paid back by retailers or others.

Receivable sellers at TRE include textiles, media, manufacturing and technology companies. Hedge funds represent about half the buyers, along with factoring companies, commercial banks and other participants.

Competition among receivables buyers has driven price discovery in the receivables market, Brownhill said, helping businesses get a better lending rate than they would by going straight to factors such as CIT, Wells Fargo & Co. (WFC) or GE Capital Corp., a unit of General Electric Co. (GE).

TRE's average rate ranges between 1.5% and 2%, with factors generally charging a fee of between 2% and 7%.

From January to June, TRE saw a tenfold rise in sales of receivables, Brownhill said. With nearly 1,000 auctions completed to date, the company has facilitated about $65 million in loans this year.

TRE's growth comes as CIT, last year the top lender under a U.S. Small Business Administration program with $770 million in loans, has scaled back lending activity.

CIT made less than $60 million in loans between October 2008 and May 2009, according to data from the Small Business Administration.

Brownhill said TRE's participants represent more than $20 billion of deployable capital available to finance small businesses.

"As an organization, we aren't dependent on lines of credit and we're not relying on the capital markets, which have dried up generally in this credit crisis," Brownhill said.

CIT’s Troubles Are Small Business’ Troubles

The troubles at CIT will have a big impact on America's small businesses. Below is an article about CIT's troubles. CIT is an excellent example of why small businesses should have multiple funding sources such as alternative financing providers. Invoice factoring is an alternative source that small businesses should consider. By selling your invoices to a factor like ACD Financial Services, a small business can get immediate cash instead of waiting 30, 60, or 90 days to get paid.

July 13, 2009, 8:02 pm

CIT's Troubles Are Small Business' Troubles

By Robb Mandelbaum

The Agenda

The liquidity problems at CIT Group are certain to mean more bad news for small business. Late Sunday night, CIT acknowledged that it was "in active discussions with its principal regulators on a series of measures to improve the company's near-term liquidity position." CIT said it had retained a major New York law firm that specializes in bankruptcy filings but would not comment on the specifics of the assignment.

CIT is a diversified financier; among other lines of business, its commercial aircraft and railroad freight car fleets are among the largest in the United States. But of interest here is its role as a major lender to small- and medium-sized businesses. According to the most recent annual report filed with the Securities and Exchange Commission, CIT's lending to these firms totaled $21.1 billion in assets at the end of 2008, making this corporate financing segment the company's largest. (A separate division that provides trade financing to retailers reported $6 billion in assets.)

Moreover, CIT is among the largest lenders in the Small Business Administration's flagship 7(a) loan program. From 2000 to 2008, in fact, it was the single largest 7(a) lender, as measured by total dollars lent — in 2008, for instance, CIT lent 6 percent of all 7(a) dollars. However, CIT's S.B.A. lending has plummeted in 2009. In the first nine months of the fiscal year, the lender had made only $65 million worth of 7(a) loans; its share had fallen to just 1 percent of the total.

CIT had an unusual method for financing 25-year loans, according to Bob Coleman, an industry analyst who publishes the Coleman Report. It would sell the S.B.A.-guaranteed portion, or 75 percent of the loan, on the secondary market, and the proceeds would finance much of the company's new loans. To finance the other 25 percent, CIT would borrow short-term money and refinance it every three months. "They had a very good credit rating, so they could borrow at low rates in the commercial 90-day paper market." But when credit markets, including both for short-term notes and pools of S.B.A.-guaranteed loans, froze last fall, CIT couldn't fund new loans.

Mr. Coleman does not believe these problems figure greatly in CIT's bigger liquidity problems. In S.B.A. lending circles, CIT is regarded as having a strong portfolio of loans. "You cannot be the No. 1 lender for 10 years in a row and have a sloppy portfolio," he says. "They weren't doing some of the crazy things that other lenders would do." Though CIT's corporate financing segment lost $167 million in 2008, it was hardly the company's worst performer: CIT Group reported a total net loss of $633 million.

Other banks could enter the small business market, but so far few have. In fact, big players here are retrenching. In March, Bank of America's chairman, Kenneth Lewis, called his institution's small business portfolio a disaster; in the first nine months of 2009, Bank of America was the 85th biggest 7(a) lender by volume, down from fifth place in 2006. Then in June, Advanta, which billed itself as a leading credit card issuer to small businesses, closed its customers' accounts to new charges. With nearly one million accounts, Advanta apparently reached nearly 5 percent of all small companies.

Reported efforts by the Obama administration to bolster the 7(a) loan program will become even more urgent if one of the 7(a)'s biggest participants becomes the latest casualty of the present economic troubles.

Invoice Factoring Provides Needed Cash

Invoice factoring for small businesses can help provide needed cash every month to cover monthly bills. Accounts receivable financing for small business has been around for more than 4,000 years. Factoring is an extremely fast way to turn your receivables into cash so that you don't have to wait 30, 60, or sometimes even 90 days for invoices to be paid.

 

SBA Patriot Express Business Loan - SBAPatriotLoan.com

The Small Business Administration (SBA) has a special business loan program for veterans and military personnel. Apply today at SBAPatriotLoan.com to access ACD Financial Services' preferred SBA lenders.

Who May Apply for These Business Loans
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Unsecured - no collateral required
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Eligibility Requirements
All SBA eligible industries considered
Start-up business allowed
Loan proceeds for business acquisition not allowed
Working Capital loans are permitted
Franchise must be on the SBA approved Franchise Registry (www.franchiseregistry.com)
Utilizes Fair Isaac Small Business Credit Score System for pre-approval of credit

 

ACD Financial Services Offers Short-Term Working Capital To Growing Businesses

ACD Financial Services provides spot factoring (single invoice factoring) solutions by offering short-term working capital to growing businesses. Many businesses do not get paid right away for delivered products/services. But every business needs some cash on hand in order to sustain and grow. So what happens if you do not get paid for a few months, and you do not have time to seek alternative financing through banks or venture capitalists? Spot Factoring is the answer to your troubles.  Spot factoring is an extremely fast way to turn your receivables into cash. In an ordinary scenario you might have to wait 30, 60, or sometimes even 90 days for invoices to be paid; ACD Financial looks at your customers' credit (not yours) and can pay you the majority of what's owed to you within as little as 72 hours.  We understand that time is money to your business!