People walk by the CIT Group headquarters in New York City.
People walk by the CIT Group headquarters in New York City. - 
Listen To The Story


Kai Ryssdal: From bailout to non-bailout now. The Obama administration has decided not to give CIT more government money to get by. CIT's the small business lender that's been teetering all week. It got more than $2 billion from the TARP last fall. That wasn't enough, and there's no more coming. So the bank's nearly one million small business customers are scrambling to find new creditors. Marketplace's Steve Henn reports.

STEVE HENN: Craig Emerzian is a commercial loan broker from Surfside, Calif. He says even though CIT's troubles just broke into the headlines this week, the bank's been putting the brakes on lending for months.

CRAIG EMERZIAN: You know, I was talking to another broker looking for hotel financing. He mentioned CIT, but they are no longer in there. I used to go try to get gas station loans from CIT -- they cut off there.

Emerzian says most of the healthy small businesses he works with have already lined up new lenders. But many of CIT's clients were struggling. For them.

EMERZIAN: The failure of CIT is going to be sorta of like the straw that breaks the camel's back.

Lloyd Chapman is the founder of the American Small Business League. He knows CITs impending collapse is unlikely to upend the financial system, but he believes hundreds of thousands of business will be hurt.

And recently Emerzian has seen new financial product hit the market that cater to small business facing a cash crunch. Some allow business people to borrow against future credit-card receipts, others take personal stock portfolios as collateral. But they typically have one thing in common.

LLOYD CHAPMAN: You are talking hard money. And so you're going to be paying more in interest. And so those companies might just be bleeding you dry.

On some loans the fees can hit 20 percent a month. But...

EMERZIAN: A person who is self-employed, his business is one of his greatest loves. And he doesn't want to fail. And they'll do whatever they can to keep that business going. And if they have this kind of a route then they will tap that route, whether it's good or not. So I see that as a problem.

For some of CIT's nearly 1 million small-business clients, these kinds of loans could be hard to resist.

In Washington, I'm Steve Henn for Marketplace.