Advanta Corp. hopes the appeal of its nascent small-business credit lines will help promote its much larger equipment leasing services.
The company is offering small-business credit lines of $20,000 by direct mail and is promoting its leasing services with inserts that accompany quarterly statements, said Michael Noles, Advanta senior vice president and general manager of business credit cards.
Advanta, the eighth-largest credit card bank, began offering equipment leases to small business in 1985 and in 1994 began offering revolving credit lines.
Advanta's small-business specialty is equipment leasing, but the company has difficulty promoting that service directly to potential customers because it cannot determine when specific businesses need new equipment.
Business credit lines have a wider appeal, are easier to sell by direct mail, and can help the company promote its leasing services, Mr. Noles said.
"We are continually letting small-business customers know we have other products, so the next time they need to lease equipment they will come to us," Mr. Noles said.
Advanta encourages its cardholders to purchase equipment they would like to lease through their business credit lines and the company will restructure the transaction as a lease. Small-business owners can use a credit card or check to access the credit line.
Advanta tested a similar program last year marketing leases to American Express' small-business credit line customers. Their partnership crumbled because American Express wanted to do larger leases than the $150,000 Advanta usually sets as a limit.
This month American Express set up a joint venture with AT&T Capital to lease office equipment. Mr. Noles said Advanta is looking at strategic partnerships with other banks.
Mr. Noles said the interest rates Advanta charges for the leases are comparable to the credit line rates, which range from prime rate plus 4% to prime plus 9% depending on the borrower's credit history.
But Mr. Noles said small-business owners would be interested in leases to free up their credit lines or to obtain equipment, such as specialized computers, which might have a short life span.
Les Dinkin, managing principal of NBW Consulting, said linking the business credit lines to equipment leases would help Advanta gain market share from banks.
"All other cards are just cards," Mr. Dinkin said. "It makes a lot of sense to establish a relationship and build on that to take more business from banks."
Mr. Noles, who worked for the small-business divisions at Citicorp and CoreStates before joining Advanta, said some banks have trouble serving entrepreneurs because such customers don't fit neatly into the bank's consumer or commercial divisions.
The small business owners tend to call more frequently with questions about their accounts, demand faster service, and want specialized quarterly statements, he said.
Although an increasing number of banks are offering small-business credit lines, Mr. Noles said the strongest competitors are still Wells Fargo & Co. and American Express.
"We got into it early enough that we have an edge over other competitors," Mr. Noles said.