Goldman Sachs Group Inc. (GS) said Monday it is in talks to potentially amend the terms of a $3 billion loan to embattled CIT Group Inc. (CIT).

The investment bank is on tap to receive about $1 billion if troubled commercial lender CIT were to file for bankruptcy. This is a point of contention as the company battles to raise additional funds as part of its broader restructuring plan.

CIT is looking at a number of different options for the loan from Goldman Sachs, one of which is trimming the $1 billion payment, according to one person familiar with the situation.

The investment bank extended $3 billion in funding to CIT in June 2008, according to regulatory filings. The 20-year contract, which was put in place as the credit markets froze, calls for CIT to pay Goldman 2.85% of the maximum amount lent, which would come to about $85.5 million annually for the first 10 years of the agreement. CIT would be required to pay $1 billion if it were to file for Chapter 11 bankruptcy.

According to a Goldman Sachs internal memo, the financing for CIT required the bank to "establish long-term funding" of its own, which it is obligated to pay even if the CIT facility is paid off early or CIT files for bankruptcy. The $1 billion payment is "designed to cover Goldman Sachs in such an event," according to the memo.

"Goldman Sachs is working with CIT and its creditors to enable it to continue to use the facility, which we believe gives it its most attractive cost of funding," Goldman spokesman Michael Duvally said.

Jeffrey Peek, CIT's chief executive, is attempting to persuade bondholders with about $31 billion in debt to swap that for new secured debt worth at least $5.7 billion less and to extend debt maturities. If enough creditors sign on, this reduction in debt load will help CIT avoid bankruptcy court, for now. The company warned in July it may be forced to file for a pre-packaged bankruptcy after it failed to get additional financial aid from the government.

The company secured a $3 billion rescue loan from a group of its largest bondholders, including Pacific Investment Management Co., Oaktree Capital, Silver Point Capital, and Centerbridge Partners, at the end of July.

CIT is in talks with these bondholders, along with some banks, to provide additional funds that could be used as debtor-in-possession financing to fund CIT's operations if it is forced to file for bankruptcy protection, people familiar with the situation said last week. Alternatively, if the exchange offer succeeds, the money would make sure the company has enough cash to operate and could also refinance some secured debt, these people said.

CIT hasn't yet finalized the new loan, but banks are expected to be chosen over the next few days to arrange the loan, according to a person familiar with the situation.

CIT, a century-old company that is one of the largest lenders to thousands of small and medium-size businesses, pays roughly 10% interest on its latest loan. Goldman's loan, made before CIT acknowledged massive financial problems, charges about 3% interest.

Duvally said the $1 billion payment the investment bank would receive in the event of a CIT bankruptcy "would not be a windfall payment." Instead, it would reflect the "present value of the spread to be earned over the life of the facility," Duvally said.

CIT declined to comment.

Shares of CIT closed down 5 cents, or 4.3%, at $1.12 on the New York Stock Exchange but were up to $1.13 in recent late trading. Goldman's stock closed up $6.86, or 3.8%, at $186.47 and are unchanged in after-hours trading.

-By Joe Bel Bruno and Kate Haywood, Dow Jones Newswires; 212-416-2469; joe.belbruno@dowjones.com