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Patty Hirsch, a senior editor at Marketplace, discusses factoring, a financing method for small businesses that has gained attention due to concerns surrounding CIT, a major lender and factor. If CIT were to go out of business, it could create financing issues for some companies. Hirsch explains how factoring works through an example involving a shoemaker named Sam, who produces trendy shoes for Nordstrom. Each month, Sam sells 20 pairs of shoes to Nordstrom, highlighting the relationship between small business owners and their clients. The discussion emphasizes the importance of factoring in providing necessary capital for businesses like Sam's.