Tighter Credit for Furniture Industry: Report

Strike one is the decline of the housing industry as more consumers have trouble paying their mortgages. Strike two is the credit squeeze that makes it tougher for firms to finance their business.

The latest sector to be hurt by the economic downturn is the furniture industry which is having problems moving inventory and gaining loans to keep operating, according to a recent article in the trade publication Furniture Today.

The article, “Credit Worries on Rise in Industry,” reports that GE Capital Solutions would cut back its unsecured inventory financing program. That follows the problems of CIT Group, a lender to middle market businesses and a major factoring firm for the industry, buying accounts receivables from furniture companies.

CIT was slammed by the credit crunch earlier this year and was forced to draw upon a $7.3 billion line of credit, sell stock to raise capital, and said it would sell as much as $7 billion in assets.
 
Executives at several firms that have completed factoring deals with CIT tell Furniture Today that the lender has instituted tougher credit standards in recent months.

A CIT executive acknowledged that the firm has seen a decline in credit quality in the retail furniture industry and that can lead to “less credit or no credit.”

But the firm remains committed to the industry and has seen a rise in demand for its services, said Terry Oelschlaeger, executive vice president and Southeast regional manager for CIT’s commercial services group in Charlotte, N.C.

Oelschlaeger says CIT “is under no constraints as it relates to providing factoring services and asset-based loans to the home furnishings industry.”

This week, CIT announced a $50 million revolving line of credit to CHF Industries, a manufacturer of fashion bedding and accessories, decorative bathroom items, and window coverings.