The economic turmoil at small- and middle-market business lender CIT Group is just the latest evidence that the credit crunch is tightening its squeeze on Queens commerce.
CIT, a bank holding company with 1 million business customers across the globe – and 50,000 reportedly in New York State – lends to industries ranging from transportation and healthcare to energy and fashion. The company received a $3 billion emergency loan from its major bondholders on July 20, intended to buy it some time and enable it to maintain its clients’ lines of credit.
As the company edges toward insolvency – the inability to pay off debts – and whispers of bankruptcy start to echo louder, local businesses and support organizations are feeling the effects.
“At the end of the day, their failure,” said Love My Shoes owner Robert Yeganeh, “affects three components of business: the supplier, the retailer and the user.”
Yeganeh, who operates one shoe store in Bayside and four on Long Island, said his vendors – and in turn he himself – rely on CIT as a “factor” that provides them with advance financing based on accounts receivable from retailers. CIT also insures vendors so they will be paid for goods even if a retailer like Yeganeh goes under.
“This is another effect of the credit crunch,” said Yagenah, noting that his industry has felt the pinch of the country’s financial turmoil for about a year.
“The bad news for me,” he added, “is that a lot of the goods I have on order will not get delivered and a lot of vendors will go out of business.”
Brian Gurski, the director of LaGuardia Community College’s Small Business Development Center (SBDC), said none of his clients have been affected by CIT. But he admitted that the company is “obviously the highest profile of a small business lender” and said its problems hint at the larger credit crisis, in which small businesses are struggling to access capital.
“There are points in the business lifecycle where financing is needed to help businesses through a growth phase or a bottleneck,” said Gurski, whose organization – part of a national SBDC umbrella – provides free one-on-one counseling to help business owners secure loans. “And the lack of access to capital or the challenge in qualifying for capital is threatening the survival of many businesses.”
Along those same lines, John Miller, the spokesperson for the New York District Office of the U.S. Small Business Administration (SBA), said SBA’s guaranteed loans in New York are down 74 percent from this point in time last year. Yet, SBA information requests in New York are way up – with 381 appeals in the past month for details on interest-free federal American Recovery Capital loans.
“We’re hearing people are not able to get credit and we’re also hearing from business owners that they don’t want to take on more debt if they don’t have the customers,” Miller said.
Dean Andriotis, the owner of clothier Beginnings Bleus, with a store in Bayside’s Bay Terrace shopping center, would not comment directly on the CIT issue. He offered, however, that business owners are “tightening their belts. You just have to adjust to the new business practices – everybody’s definitely being more careful.”
While Andriotis said he is “not having as much difficulty” after 30 years in the retail industry, he admitted that his friends “who are just looking to enter the market aren’t getting approved by the CITs” of the world.
For Todd November, who took over Bayside’s Cheesteak Factory in February, Cash on Delivery is just a better – and smarter – way to run his business.
Credit leads business owners to overbuy and build up large balances, November explained.
“I’m a one-man operation,” he went on. “If things got worse, I would never take out credit because that’s when you run into more problems.”
“If I did it on credit,” he added, “I would have some issues if the credit dried up. Where would I get my product from?”