According to the Star-Telegram, the small business credit card lender Advanta Corp. has filed for Chapter 11 bankruptcy protection. The bankruptcy filing comes five months after the company announced that it was shutting down its credit card lending business in an effort to preserve cash as its loan losses increased.
The article said:
“[Advanta Corp.] said it has nearly $100 million in cash on hand, but that would not be enough to meet its debt obligations over time. In its filing, the company listed total assets of $363 million and total debts of $331 million.”
Advanta’s profits and viability was hit hard by the credit crisis and its small business customers many of which are unable to pay off their debt leaving the company with heavy loan losses. If the recession continues to negatively impact business credit card companies we may experience several more bankruptcy filings by credit card companies and banks who lend to small businesses.