CIT has been an important participant in the small business loan marketplace for the past 100 years and today, they are in bankruptcy. A sign of the times but not a reason for panic.
In 2008 CIT was the largest Small Business Administration loan provider. However, CIT provided just $65 million of business loans in the first half of this year.
I am willing to bet, however, you are not familiar with CIT because they are not a lender to very small business owners like you as they tend to lend to much larger “small businesses”.
So, what will be the impact to American small business owners in need of working capital and small business loans? Let’s focus on the bullet points today as there will be time to speculate over the next few weeks.
1) The US Governments $2.3 billion equity position created from its cash infusion a few months ago has been entirely wiped out…Sorry.
2) 90% of creditors have already agreed to CIT’s restructuring plan and they expect to be out of bankruptcy in about 60 days. They will not disappear but there is no competitor looking to fill the void created by their lack of lending.
3) Their troubles stems from their SBA lending, so it is fair to assume some changes will be made in their business loan underwriting guidelines.
4) The “small business loans” CIT is well know for are typically to multi-million dollar businesses with dozens or hundreds of employees. They are not a significant provider of working capital or small business loans for very small businesses.
The macro economic impact is more concerning. In the short term as it is very likely businesses both small and large will hoard cash and reduce investment plans in the near term, which will not help our economy.
Have you every had a business loan with CIT? I’d love to hear what communications they have had regarding their business loans and any changes you can expect.
(Jason Kuffer photo (CC))
