05 November 2009

CIT bankruptcy could leave UK SMEs struggling to secure finance for vital investments

CIT became one of biggest UK providers of asset finance through acquisition of Barclays Vendor Finance

The bankruptcy of US lender CIT could leave UK SMEs struggling to secure finance for vital investment in IT and machinery, warns Syscap, a leading independent finance provider.

CIT, which filed for bankruptcy on Sunday (Nov 1) is one of the UK’s largest providers of vendor finance which enables companies to fund investments in IT, telecoms and plant and machinery.

CIT completed the acquisition of Barclays Bank’s UK and German Vendor Financing arm in January 2007. At the time of the acquisition Barclays Bank Vendor Financing had assets of £1.1billion.

Comments Philip White, Chief Executive, of Syscap: “Although CIT is not the biggest household name in finance it played a very important role in funding UK SMEs through its vendor programmes.”

“For many SMEs being unable to finance the replacement of redundant IT or machinery will leave them unable to operate properly.”

“With mainstream institutional lenders still resisting Government efforts to increase lending to SMEs the shrinkage of CIT is going to increases problems for SMEs trying to access funding.”

Syscap says that although it has had success in attracting new bank funding into vendor financing over the last few months it is inevitable that the bankruptcy of CIT will leave a void.

Says Philip White: “We are receiving an increasing number of approaches from companies that had established vendor finance programmes and need an alternative partner to support their sales effort. Without vendor financing their ability to sell their solutions is diminished and the ability of SMEs to make investments in their business is weakened.”

Syscap says that they are currently engaged in a number of projects that utilise additional liquidity that they have brought into the market to help fill the gap created by the funding gap created over the last year.

Recent research by Invigors, the independent finance industry analysts, found that 90% of the vendors say they have seen a decline in available funding over the last year. Vendors say that acceptances from lenders for funding requests are down by almost 30% and 55% of vendors say that they have been unable to close sales as a direct result of the lack of available finance.

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