A brief look at CIT Group Inc.

A brief look at CIT Group Inc.

On Monday, CIT Group Inc. said it is still in talks with regulators on ways to improve its near-term liquidity as recent losses may jeopardize its compliance with capital requirements. The company’s stock plunged almost 12 percent on the news. The following are some details on the company.

What is it?: CIT Group is a commercial bank holding company that offers lending, leasing, and advisory services to small and mid-sized businesses.

Why is the company in trouble?: CIT began struggling with the collapse of the housing market and subprime mortgage market. CIT’s former consumer finance division was a top subprime lender and as defaults in the housing market, expecially among loans give to customers with poor credit history, CIT faced mounting losses. Those losses strained its capital base and as the credit crisis grew, CIT Group’s primary short-term funding sources such as commercial paper evaporated.

The lack of funding and capital constraints have led to ratings downgrades as well.

Who are its customers: CIT Group’s base of 1 million customers includes small and mid-sized firms across a wide array of industries, including retail, manufacturing, aerospace and rail.

What happens if it fails?: Should CIT fail, other banks would have to step in and provide financing and lending to the market CIT specialized in. Financial firms that focus on this type of lending and financing would be poised to gain some market share. But some borrowers might not be able to find financing from other lenders.