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TheStreet Open House

Community Banks Step In for CIT Group

Stocks in this article: CIT C BAC

CHICAGO ( TheStreet) -- How jaded we've become.

Once, the idea of a multibillion-dollar company going bankrupt would have sent the stock market into a panic. Now, we simply shrug our shoulders and wonder who'll be the next to fall.

This week, CIT Group (CIT - Get Report) became one of the largest corporate bankruptcies in history. The $71 billion bank holding company has nearly $65 billion in liabilities, and the bankruptcy is being spun as a reorganization -- a chance to refinance debt obligations and come out leaner and stronger.

The fact that the company's major debt holders support the plan was seen as an encouraging sign, as was the company's prediction that the fast-tracked process would wrap up by the end of the year. CIT had been struggling for a while, along with practically every other financial company. The bankruptcy announcement was news, but hardly earth-shattering.

One group, however, seemed particularly vulnerable to the change in CIT's fortunes. CIT specializes in servicing small and mid-sized businesses. With CIT in trouble, would financing for small businesses be that much harder to find?

Not necessarily.

CIT's troubles are certainly bad news for the businesses that count on it for financing. Its small-business lending division is the country's leading provider of Small Business Administration loans, and thousands of small manufacturers depend on its factoring services, which provide the funding for them to supply goods to large retailers. Such financing arrangements are especially crucial now, in the lead-up to the holiday season.

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