Small Business Credit Lender Advanta Files for Bankruptcy
Chapter 11 Filing Comes Just One Week After Small Business Lender CIT Group’s Bankruptcy
In a time where bloated banks and businesses are antagonized for deflating the economy, small businesses are the steadfast champion of the people for creating jobs and improving communities.
Small businesses everywhere feel the grunt of strapped credit so much that the majority of small business owners adamantly protested the new health care bill for being too “costly”: the act is less political than it is a mode of survival.
Now one of the last dependable small business lines of credit has depleted, as lender Advanta Corporation has filed for Chapter 11 bankruptcy. As debtor defaults rose, Advanta was symbiotically stricken, which caused them to cut off 1 million accounts. Advanta even hiked up their interest rate to 25%, stretching their loan holders’ paper thin monthly budgets even tighter.
Though the small business credit provider might not be considered in the same breath as “too big to fail”, it is one of the largest credit providers to seek bankruptcy protection. Its write-offs this June were 56.95%, which is massive compared to the industry standard of 10.73%,, with 24% of their loans defaulting.
Advanta’s bankruptcy will obviously have a huge impact on small business lines of credit, but will it cause their subsequent bankruptcy as well? Advanta’s spokesperson predicted the small business credit line would be back on its feet within a few months. A Chapter 11 bankruptcy does not necessarily spell imminent collapse under normal circumstances, but Advanta’s $363 million capital falls just a hair short of federal regulations. Advanta’s bankruptcy will still be treated as a Chapter 11 reorganization bankruptcy, but maneuvered by the hands of an FDIC receivership.
Small business bankruptcy has risen 44% in the third quarter, compared to small business bankruptcy filings a year ago. Credit defaults tend to match the unemployment rate head to head, now at 10.2%. For the individual just struggling to get by, credit survival is a vicious cycle. When defaults rise, so do interest rates. If you are already knee deep in debt there is a solution; talk to one of our attorneys today to find out how a bankruptcy filing can defend you from the unexpected. Call us toll-free at 1-800-260-1402 for a free bankruptcy consultation today.
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