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Patty Hirsch, a senior editor at Marketplace, discusses the financing method known as factoring, which is gaining attention due to concerns about CIT, a significant lender and factor. Small businesses worry that CIT's potential failure could jeopardize their funding. Hirsch explains the dynamics of factoring through the example of a shoemaker named Sam, who produces trendy shoes and sells them exclusively to Nordstrom. Each month, Sam ships 20 pairs of shoes to Nordstrom, establishing a clear relationship between small business owners and their clients. This context sets the stage for understanding how factoring integrates into small business operations and financing strategies.