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Another blow to small businesses came in the form of Advanta's bankruptcy filing this week. This news coupled with CIT's bankruptcy means that getting credit lines and loans that small businesses need will just get harder and harder.
Advanta is a small business credit card lender. They filed for Chapter 11 bankruptcy this past Sunday CNN reports. Its lending arm called Advanta Bank Corp. was not including in this filing.
News of the Advanta bankruptcy is not surprising. It had stopped giving out new loans earlier this year. It has also seen a very sudden rise in defaults on the loans it had already given out to small businesses. Advanta had listed out its assets as valuing $363 million while its debts are $331 million.
Just this past September, Advanta had its defaults rise up to 24%. That is more than double from what it was a year ago.
Advanta has come into scrutiny in the past because it initially offered credit cards with low interest rates and then hikes up the rates over 30%.
According to BusinessWeek, the company had stopped all new credit card lending in May and then settled with FDIC over the interest rate hike practices. The FDIC said that the hikes constituted unfair and deceptive practices. Advanta did not admit or deny this claim during settlement.
Advanta also has to contend with lawsuits. There have been class action lawsuits over these unfair and deceptive practices. There is also a class action lawsuit from Advanta's stockholders. You can get a play by play of each of the lawsuits that Advanta has to contend with here at the Philadelphia Business Journal.
So while the news of the Advanta bankruptcy is hard on small business owners looking for open credit lines, it actually may turn out to be a silver lining instead.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.