AUDIO: Got a loan with CIT? Better review it now says expert

SAN FRANCISCO
November 4, 2009 12:01am

The bankruptcy this week of CIT Group Inc. could quickly impact the small- and medium-size businesses that are its main borrowers, says Jeffrey Sweeney, managing partner at asset-based lender U.S. Capital Inc., a financial services firm in San Francisco.

“Some companies are out of compliance. Those are the companies that really need to actively seek another lender,” says Mr. Sweeney. “If your loan got sold to a vulture fund or one of these secondary sources, that could be a problem.”

He says CIT borrowers should be proactive in looking for another lender, even if they are in good standing with the bankrupt company.

The bankruptcy filing by the 101-year-old CIT is one of the biggest in the nation’s history. The company listed liabilities of $64.9 billion and assets of $71 billion in its Sunday filing.

Observers say a number of its customers have bailed because of the bankruptcy.

“Is CIT going to have the funds to advance against your assets?” says Mr. Sweeney. “With CIT in bankruptcy, you don’t know what’s going to happen. You don’t know who’s going to end up with your loan.”

(Jeffrey Sweeney talks about what businesses will want to consider because of the CIT bankruptcy in today’s CVBT Audio Interview. Please left-click on the link below to listen now or right-click to download the MP3 audio file for later listening.)

CIT got $2.3 billion in federal bailout aid last fall. The company has received a $1 billion line of debtor-in-possession credit from Icahn Capital to ensure cash flow. It says it hopes to make its journey through bankruptcy fairly short, perhaps exiting the process within two months.