Updated from 9:30 a.m. EST



) --



is losing some financing from

CIT Group

(CIT) - Get CIT Group Inc. Report

, which could ultimately set off a chain reaction among other backers.

CIT will no longer finance some loans to Sears' suppliers who are waiting to be paid by the department store.

While Sears has been making payments on time, CIT hasn't received some financial projections it requested from the department store operator, said Jack Hendler, president of Net Worth Solutions, a merger and acquisition advisory firm.

Other factors -- those who provide loans or lines of credit to suppliers and apparel makers to tide them over until retailers make payments -- are still approving orders, he said, but are also awaiting similar information and have been cautious. "CIT decided not to wait and get their attention," Hendler said.

Several big names in the factor community had expressed concern in December over the state of Sears, saying vendors are already starting to pull back and could distance themselves further from the company if things don't change soon.

One such financier, who wished to remain anonymous, said most were waiting until fourth-quarter numbers are released to assess the situation.

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"All of the factors are looking at pulling back," said another factor. "We are all watching it closely and concerned about it. It isn't dire right now, but it ultimately means they will have to file, but that's still a while to go."

"The concern is if Sears keeps reporting losses what will happen by the end of the year when debt starts coming due in 2013," Hendler said. "But Sears has enough assets at least to give the financial community comfort."

But Sears said it isn't too concerned about CIT's recent actions.

"It's important to note, that Sears Holdings has more than adequate liquidity and ample resources at our disposal which give us significant financial flexibility and equally important is to separate disappointing operating performance with liquidity," Sears spokesperson Chris Brathwaite said.

At the end of December, Sears had about $4.2 billion of liquidity and paid all borrowings on domestic revolving credit facility, ending the month with minimal borrowings of $90 million and $621 million of letters of credit outstanding. This resulted in availability of over $2.5 billion on domestic credit facility and $800 million on Sears Canada facility for total $3.3 billion in total available credit.

Braithwaite said Sears does expect to increase borrowings on its domestic revolving credit facility during January.

"In sum, we disagree with their action, in fact we'd point out that other factors are approving shipments to Sears Holdings and CIT's payables represented less than 5% of inventories," Braithwaite said.

Sears announced last month several cost-cutting initiatives, including closing between 100 and 120 Sears and Kmart stores. It also named Ron Boire as chief merchandising officer.

The department store has been struggling to woo shoppers as it's being pegged as a dinosaur. During the all-important holiday season, same-store sales dropped 5.2% and the company issued a profit warning for its fourth quarter.

CIT declined request to comment.

Shares of Sears fell $1.35, or 4.1%, to $31.55 midday Thursday.

-Reported by Jeanine Poggi in New York.

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