Retailers Feel CIT’s Pain : The impact on holiday sales could hamper the recovery’s start

Kiplinger reports:

One big repercussion from CIT Group’s woes: even more new troubles for retailers. The $3-billion deal that the lender orchestrated with bondholders will keep CIT afloat, at least for several months, but it will crimp a key business line for retailers: vendor financing.

CIT serves as a “factor,” or lender for vendors, which typically need bridge loans because they’re not paid for goods that stores order from them for anywhere from 60 to 120 days after retailers receive them. The loans are especially important in keeping operations afloat for smaller suppliers.

This is a big story because it affects retail sales, which is 70% of the economy.