Advanta to Cease Small Business Credit Card Lending
May 12, 2009
Advanta Corp, which specializes in small business credit card issuance, has taken the drastic step of completely shutting down the issuance of credit beginning June 10. No new Advanta credit cards will be issued, and current Advanta customers will not be allowed to make further purchases with their cards. (Current customers will of course be liable for debts they’ve incurred.) While Advanta is leaving the door open to conducting business in the future, the new mode of operation will be to collect receivables from past customers and use that capital to pay off shareholders in Advanta’s securitization trust.
Advanta’s uncollectable debt had reached 20 percent and the company reported a loss of $76 million in the first quarter. At least one stock analyst predicted the company was headed for bankruptcy.
Advanta’s current small business customers will likely be scrambling for new credit lines, as the business credit card market has shrunk significantly. Credit card issuers that once saw the small business market as fertile ground for growth have scaled back their offers. Among the cards still marketed, interest rates have risen and card reward programs have been discontinued or watered down.
