Unleashing the value of your assets through asset-based financing. (Special Adverting Profile: CIT).

One of the leading asset-based lenders on the West Coast is CIT (NYSE: CIT), a 95 year-old Fortune 500 company that provides financing to middle-market commercial and industrial companies. We recently spoke with several representatives from CIT to learn their insights about the Los Angeles lending arena.

Backed by almost $50 billion in assets and an "A" credit rating, CIT has five specialized operating groups, each focused on providing various financing solutions for different industry segments. The firm lends to companies of all sizes, from start-ups to large corporations. CIT'S loans include Small Business Administration loans, aircraft and rail car loans, equipment loans and leases, factoring, project finance and various forms of asset-based lending.

Financing all Stages of the Business Cycle

CIT Business Credit provides growth financing, acquisition financing, working capital, debt refinancing, turnaround financing, debtor-in-possession financing and confirmation plan or exit financing.

Business Credit is one of the nation's leading providers of asset-based lending. The unit also recently added a group. that handles cash flow loans.

"We lend to companies in all stages of the business cycle," explains Thomas Hayes, Senior Vice President and Western Regional Manager for CIT Business Credit. "Some of our clients are experiencing rapid growth or are planning an acquisition. Other clients are in a cyclical or highly seasonal business or may have had a few quarters of losses. Others come to us when they are in a turnaround mode or are entering or exiting. bankruptcy."

"We understand companies in transition," says Hayes, "Since we are asset-based lenders, we are often able to provide liquidity to companies that are unable to get traditional bank financing. As long as a company has collateral, such as accounts receivable, inventory, fixed assets, or even intangible assets like patents or trademarks, we will focus on structuring a financing solution to meet the company's needs."

Hayes remarked that over the past two years, CIT has seen a significant increase in the number of companies turning to asset-based financing.

Much of this is a reflection of the current economy and general downturn in business among companies in a wide variety of industries. This, in turn, has caused a decline in the financial performance of some companies. As a result, many companies are not in compliance with loan covenants and no longer qualify for unsecured loans. Borrowers are restructuring their loans and realizing that asset-based lending is a viable alternative. In some cases, asset-based lending results in increased borrowing capacity.

Hayes believes this trend will continue. "While a wide variety of companies have always used asset-based lending, the pressures generated by the current recession are causing scores of other companies that were once bank borrowers or non-secured borrowers to turn to asset-based lending," he says.

Asset-Based Loans Versus Unsecured or Bank Loans

Asset-based lending is financing that is secured by assets of determinable value, typically trade receivables, inventory or equipment. By tapping into these balance-sheet assets, lenders can often find a level of comfort to make loans to companies with unsteady cash flow or losses.

By comparison, a loan from a commercial bank is typically based on cash flow. Hayes remarks, "In the present environment of earnings deterioration, many companies may no longer be able to adhere to the financial covenants of traditional bank loans."

"Cash-flow lenders typically avoid companies with negative cash flow, historical or projected losses, or industries in a downturn. Asset-based lenders look beyond these characteristics to the underlying value of the borrower's collateral," he adds.

When asked what an asset-based lender typically looks for, Hayes answered, "Give me a viable business plan and good collateral and we can probably do the deal."

Financing far Retailers

CIT Business Credit's Retail Finance Group specializes in providing financing to retailers. This dedicated team structures, underwrites, funds and manages asset-based loans for retailers of all sizes.

"Retailing is a significant part of Business Credit's lending portfolio, and represents over $3 billion in commitments outstanding to a wide variety of retailers such as regional and national chain stores, drug stores, supermarkets, sporting goods, gourmet products, jewelry, apparel and catalogs," explains Gary Prager, Executive Vice President and manager of the CIT Retail Finance Group. "We provide revolving lines of credit and term loans of $10 million to $300 million for working capital, growth, acquisitions, debt restructuring, turnarounds and debtor-in-possession financing," explains Prager.

Adds Prager, "Sagging consumer confidence coupled with geo-political pressures and a challenging labor market that continues to shrink has increased demand for flexible financing by a lender like CIT that specializes in the retail sector," remarks Gary Prager.

CIT Commercial Services: Factoring and Financing

CIT Commercial Services is one of the nation's leading providers of factoring, accounts receivable management, credit protection, and lending services. Commercial Services specializes in serving apparel, footwear, textile, furniture, home furnishings, housewares and other industries that sell into retail channels of distribution.

Commercial Services offers a full range of domestic and international customized credit protection, factoring, lending and outsourcing services as well as revolving lines of credit and term loans. It also offers bulk purchases of accounts receivable, import and export financing, purchase order financing and letter of credit programs.

"Clients turn to CIT Commercial Services when they want to improve cash flow, reduce the risk of charge-offs, increase sales and improve management information," explains Mitchell Cohen, Senior Vice President and Western Regional Manager of CIT Commercial Services.

"The companies we serve range in size from $2 million in annual sales all the way up to Fortune 1000 corporations. Approximately 75% of our clients factor less than $10 million with us," says Cohen. "We have grown our business by serving the small and mid-sized manufacturers and supporting them to become the leaders of tomorrow."

Customer Concentration Levels Increase Demand for Factoring

Recently, CIT Commercial Services has seen an increase in inquiries from manufacturers who have large customer concentrations. They are turning to CIT as a risk management tool to protect their companies against bad debt losses.

"We have a service called Select Customer Credit Protection that offers manufacturers credit protection on one or more customers," explains Cohen "Companies use this service when they are uncertain about the credit-worthiness of a customer. The customer may be reorganizing, in a turnaround situation, in Chapter 11, or may simply pose a large credit; exposure that is beyond the manufacturer's comfort level."

With this service, the client is protect ed in the event the customer is financially unable to pay. CIT will assume responsibility and pay the full amount due.

Speaking the Language of its Clients

In recent years, upon observing the significant influx of Asian businesses on the West Coast, Cohen built an in-house Asian speaking team to meet the unique needs of Asian business owners. These resources include Client Service Teams and a recently opened CIT Commercial Services office in Shanghai, China in addition to its existing office in Hong Kong.

"Our Pan Asian team speaks the language of our clients," explains Vivian Lee, Managing Director of CIT Commercial Services - Pan Pacific Ltd. "Various employees speak Chinese, Mandarin, Cantonese or Taiwanese. This has given CIT a competitive advantage in the market place because our Client Service Officers are able to overcome language barriers, enabling our clients to focus on the business at hand -- getting the financing and factoring their businesses need."

CIT

300 South Grand Avenue

Los Angeles, CA 90071

CIT Business Credit

Thomas Hayes

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CIT Retail Finance Group

Gary Prager

Executive Vice President

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CIT Commercial Services

Mitchell Cohen

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www.cit.com

www.CITCommercialFinance.com