CIT’s financial woes are affecting the small and medium businesses’ prospects of receiving factoring loans in order to buy Christmas inventory. Factoring involves selling a business’ inventory for cash. Many small and medium businesses were dependent on CIT to provided loans for the purchase of inventory for Christmas. In return, the companies would assign their accounts receivable to CIT.
Now is the time when the businesses need to purchase inventory for the Christmas season and if they do not receive financing, they may not be able to take advantage of increased sales for the holiday season.
It would be risky to enter into factoring negotiations with CIT now, since bankruptcy is still a possibility. If business owners sell their invoices to CIT and CIT files for bankruptcy before the businesses collect the funds, then they would risk losing the money under a bankruptcy.