Many small businesses lose their credit

— -- Nearly a million small-business owners have been forced to add a new — and rather daunting — item to their to-do lists: find a new line of credit.

"This is the worst thing that has happened to my small business since our economic crisis began," says Glenn Thomas, who designs and installs home entertainment systems. "They (Advanta) have been my lifeline for the last six years."

He discovered that his $28,500 line of credit would disappear after reading a notice on Advanta's website on Monday.

Advanta CFO Philip Browne says "negative economic trends" fueled the company's decision.

The company is wrangling with a rise in uncollectible debt and overdue credit card payments. In addition, it is losing funding from an independent trust that provides resources for new transactions.

Advanta's financial woes mean even more pressure on already-strapped business owners, says Todd McCracken, president of the National Small Business Association.

When credit lines are reduced — or outright severed in this case — businesses could have problems such as buying needed supplies or equipment.

Nearly 60% of small-business owners said they've used a credit card as a financing tool in the last 12 months, according to a NSBA survey released this month.

Thomas, based in Santa Clara, Utah, is concerned about how he'll make purchases once his Advanta card — his only business credit card — is obsolete. Getting new credit "is a lot tougher than it used to be," says NSBA's McCracken. "(Firms) are not going to have credit card companies knocking on their door like they used to."

Adding to troubles, the credit loss could affect the FICO scores of the account holders. "You should be aware that 'utilization percentage,' which is a way of describing how much of your available credit you use, may be affected because your available credit will decrease as a result of the closure, and this may affect your credit score," Advanta says on its website.