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CIT's Retail Impact?

As if 2009 hasn’t been a rough enough year for businesses in the U.S. – this past Sunday brought with it the prospect of even tougher days ahead for small and mid-sized business owners.

CIT Group , one of the nation’s largest providers of credit to small and mid sized companies, declared bankruptcy after months of struggling to avoid collapse. While the company said it’s lending operations will remain open as it heads through bankruptcy, some on Wall Street fear Sunday’s announcement adds further instability to one industry that’s already been under pressure: RETAILERS.

About 60% of the apparel industry depends on CIT for financing – with the company helping 2000 vendors supply merchandise to more than 300-thousand stores.

Sunday’s bankruptcy announcement comes as retailers gear up for the holiday season. And with so many stores dependent on CIT for financing, the big question on Wall Street is if the collapse of the lending giant will bring down companies within the retail sector.

Monday on the Closing Bell, Michael Appel, Managing Director of Quest Turnaround Advisors told Maria Bartiromo while CIT’s bankruptcy announcement isn’t good for retailers, fears about a rash of stores collapsing in the run-up to the holidays might be overblown. “For some of the larger retailers, many of them, they've already received a lot of their goods in their distribution centers."

Appel went on to say cash injections CIT’s already received will likely help prop up the company's lending operations through the holiday season. “Since they've gotten an infusion of $4.5 billion in financing, those operating divisions should be in pretty good shape to continue to provide credit to their trade vendors."

However, Joe Alouf, Partner at Eaglepoint Advisors said the major concern for retailers comes after the holidays pass. “The question is going to be what's going to happen to all the smaller middle market customers that have traditionally used CIT." Alouf also warned that with credit hard to come by for so many companies, it might be tough for smaller businesses to find a new lender.

Whatever the case may be – investors should be keeping an eye on the retail sector in the coming months.

Brad Quick contributed to this article.

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