NovaStar Financial Inc. greatly reduced its third-quarter loss compared with the same period last year, but its shareholders’ deficit reached more than $1 billion, and the company said its “ability to continue as a going concern” is in doubt.

In a Friday filing with the Securities and Exchange Commission, Kansas City-based NovaStar (Pink Sheets: NOVS) reported a loss of $17.6 million, or $2.29 a share, for the quarter that ended Sept. 30. This is an 87 percent improvement from a loss of $142.8 million, or $15.81 a share, last year.

The company said it plans use its cash on hand to develop new businesses such as StreetLinks National Appraisal Services LLC and Advent Financial Services LLC, which provides refund-anticipation loans and related services to low- and moderate-income customers.

“Management believes that StreetLinks is situated to take advantage of growth opportunities in the residential appraisal management business,” NovaStar said in the filing. “We have added significant new customers for StreetLinks during 2009, which have produced significant increases in revenue for StreetLinks during 2009.”

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