Todd Taskey

An entrepreneurial business owner, Todd Taskey has more than 25 years of finance and investing experience. Prior to founding Potomac Business Capital, Todd was a founding investor, board member or management team member to five other business ventures. Armed with the insight from his past successes and failures — and ongoing conversations with growing business owners and entrepreneurs — Todd provides market strategy and finance advice via his Wrong Question blog and national public speaking tours.

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For the past century CIT has been an important participant in the small business loan marketplace.  In 2008 CIT was the largest Small Business Administration loan provider.  However, CIT provided just $65 million of business loans in the first half of this year.  Their troubles have already been felt by small business owners, now the company has filed for bankruptcy.

So, what will be the impact to American small business owners in need of working capital and small business loans?  Let’s consider the bullet points at this point and not speculate.  There will be plenty of time to assess the impact over the next couple weeks.

The US Governments $2.3 billion equity position created from its cash infusion a few months ago has been entirely wiped out…Sorry.

90% of creditors have already agreed to CIT’s restructuring plan and they expect to be out of bankruptcy in about 60 days.  They will not disappear but there is no competitor looking to fill the void created by their lack of lending.

Their troubles stems from their SBA lending, so it is fair to assume some changes will be made in their business loan underwriting guidelines.

The “small business loans” CIT is well know for are typically to multi-million dollar businesses with dozens or hundreds of employees.  They are not a significant provider of working capital or small business loans for very small businesses.

The macro economic impact will be significant in the short term as it is very likely businesses will hoard cash and reduce investment plans in the near term, which will not help our economy.

Do you have a business loan with CIT?  I’d be interested to hear what communications they have had regarding their business loans and any changes you can expect.