posted on Nov, 4 2009 @ 08:52 PM
I don't know about structural collapse just yet (though I am fairly certain it is not outside of the realm of possibility), but I think that the key
to the CIT bankruptcy will be whether it has any effect on its lending facilities to small business owners.
Credit is already tight, so I don't think that the failure of CIT will be anything new in that regard for business owners. Credit has been tight for
a long time now, going on over 2+ years.
But how this will effect existing CIT clients should be interesting to watch. If credit terms are suspended (as in closing down a company's Line of
Credit, for instance), then there will be some serious fallout because too many businesses rely on their financier to keep them afloat. And there
aren't a whole heck of a lot of lenders in the market right now sticking their head out for a small business owner that can take CIT's place. Most
small banks are just treading water or drowning. Credit is tight, tight, tight.
But for the entrepreneur or business owner, this is really not all that new. They have been dealing with tight credit for 2 years now. So a lot of
businesses have learned to adapt, cut back on expenses, or simply shut their doors. Most business owners are not in growth mode that requires
overextending themselves on debt obligations. If anything, they are trying to get out of debt and build their reserves to weather the storm.
So I don't think that CIT filing bankruptcy is really going to be all that bad - Because credit was already tight as it is, and the existing
businesses that have debt obligations to CIT will still be required to continue making their monthly loan installment payments. I don't really see
how this will have a huge impact, because it sounds from the news that CIT will continue to operate in the marketplace. Only if we see CIT suddenly
pull its lending facilities from small business owners - that's when it could get ugly.
You may or may not know that CIT was a big time player in the equipment finance business. That means that they finance hard asset equipment for
business owners - phone systems, computers, machinery and the like. Most business owners have cut their equipment budget to the bone, and they are
trying to make do with what equipment they already have and delaying making upgrades unless it is an absolute must. So I don't see much of an impact
to small business owners in that regard either.