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CIT: Factoring Clients are Key Target Market and the Financing Situation is Explained

July 30, 2009

According to this article in Reuters, there are a number of other finance companies that are willing and able to help some of the CIT client base, estimated at 1 million people.

companies ranging from small regional bank Sterling Bancorp (STL.N) to private lenders like Interface Financial Group and FGI Finance are seeing increased customer orders for their factoring services.”There are clients of CIT that may be interested in coming to stronger factors like Sterling,” the bank’s Chief Executive Louis Cappelli said, adding that the bank is getting a big influx of new business because of CIT.

“We expect it to be in the millions.

“I believe water seeks its own level,” he said. “And so over a period of time, the business will be assumed by others.”

David DiPiero, chief executive of FGI Finance, agreed.

“It would take a little bit of time, I believe, to transfer clients over, but I believe that the market would find a solution and support it,” he said.

Interface Financial Chairman George Shapiro said his company was also benefiting from CIT’s woes.

“We can increase our portfolio,” he said. “We can acquire a lot of clients who’ve been with CIT before.”

Financing Explained

This Wall Street Journal article very clearly explains why JP Morgan is sitting on the sidelines with relief funds. Basically, they don’t want to loan CIT any money without it being court-ordered and approved (which is the opposite of what CIT wants. It’s angling for an out of court restructure). However, to keep loaning clients the funds needed to finance and factor, CIT needs their commercial paper (bonds) to keep selling.

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