CIT Group received preliminary approval for a $2.33 billion investment by the US Treasury today, one day after the Federal Reserve approved the commercial finance firm's bid to become a bank holding company.

The approval means CIT, which makes loans to businesses and individuals, has succeeded in its bid to become a bank holding company, a requirement to take part in the government's Troubled Assets Relief Program (TARP). The company had applied for as much as $2.5 billion in aid.

CIT is one of several commercial finance companies that, after being hit by the financial crisis, have sought bank holding company status to qualify for government equity injections under the US Treasury's $700 billion financial bailout fund. Others include GMAC, Morgan Stanley, Goldman Sachs and American Express Co. (See: Goldman Sachs, Morgan Stanley surrender investment bank status)

Bank holding company status also would allow CIT to borrow funds directly from the Fed's discount window. The CIT approval followed the New York-based finance company's debt-for-equity swap last week, which was expected to raise $1.5 billion in regulatory capital.

The company had said it expected the government plan to provide it with greater access to capital, allowing it to continue its current operations and increase its deposit-taking capabilities, which would further stabilise and diversify its business. It said last month it remains committed to providing loans to small and midsize businesses that have been struggling to get loans amid the global credit crunch.

CIT relies on its ability to raise money in the capital markets to pay for the loans it makes to businesses and individuals. But the company's access to funding evaporated in March, prompting the century-old firm to drain a $7.3 billion credit line. Since then, CIT had been looking to slim down and unloaded its home-lending business in July.

The commissioner of Utah's Department of Financial Institutions also approved the application of CIT's wholly owned unit, CIT Bank, to convert to a Utah state bank from an industrial bank. Holders of such charters can offer many of the same products, including loans and credit cards, as commercial banks but aren't subject to the more stringent regulation of a bank holding company.