Wall St. Journal, New York – Ailing business lender CIT Group Inc., which recently signed a $3 billion financing deal with its largest bondholders, will provide $1 billion of that money to a unit that gives cash advances and credit to manufacturers and retailers, it told some customers on Friday.
In a memo addressed to “clients and industry associates,” the unit, called CIT Trade Finance, said the provision of $1 billion by its parent, CIT Group, reflects its “commitment to support” the unit and its clients.
CIT is a major lender to small and mid-sized businesses. Its liquidity woes have raised concerns that financing for some of its borrowers could be disrupted. The company is trying to stay out of bankruptcy court and preserve its lending franchise.
CIT Trade Finance is involved in an activity known as factoring, which involves giving manufacturers cash for their receivables, and collecting on their invoices from retailers and other buyers of their products.
Two weeks ago, worries about a CIT collapse caused disruptions in some industries where many businesses are CIT customers. Some apparel manufacturers halted product shipments because they were worried they wouldn’t get paid for goods if CIT didn’t pass cash it collected from retailers back to vendors.
You must log in to post a comment.