Sept. 30, 2009  -- Remember CIT? The major lender to small and medium-sized businesses that came back from the brink of bankruptcy in July? Now, CIT Group Inc. is back on the brink.

The company is furiously trying to work out a deal with bondholders that would wipe out around 30 to 40 percent of its more than $30 billion in debt, a source in the financial industry told ABC News, confirming a story in today's Wall Street Journal. If the bondholder deal falls through, the company will likely have to file for bankruptcy.

At this point, the source told ABC News, the century-old company is "hanging by their fingernails."

CIT had no comment.

The last-ditch effort to avoid bankruptcy is the latest chapter in a saga that has gone on for months. CIT accounts for around 60 to 70 percent of financing for small and medium-sized businesses such as Dillard's department stores and Dunkin' Donuts. But the company ran into problems after diving into subprime mortgage lending and student lending. In late July, CIT secured a $3 billion agreement with bondholders to stave off bankruptcy.

The bondholder agreement came days after the government said it would give no additonal bailout money to the company, after providing $2.3 billion in Troubled Asset Relief Program funds in December. Before the bondholder agreement was reached, CIT had asked the Federal Deposit Insurance Corp. to allow it to issue debt backed by the government, enabling the company to bring in cash and continue lending. But the FDIC balked, so CIT turned to the Treasury Department and the Federal Reserve. But the effort ended in vain.

On July 15, the Treasury said, "Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies."

The government's decision was a testament to the improvements in the financial system in the past year. If CIT had failed last fall or last winter, its collapse could have been catastrophic. But, this year, even though a CIT bankruptcy could be one of the biggest Chapter 11 filings in the country's history, the government was no longer compelled to help.