Calling itself the David battling Goliath-size banks and finance companies, a tiny Houston-based firm hopes to attract small-business borrowers.

Small Business Loan Source Inc., with 18 employees, has assisted small businesses in packaging their applications for the Small Business Administration since 1989. But the privately-held company previously had to deliver those customers to banks that had authority to make the loans.

"It was the most frustrating period for us because the loan would go to the bank and sit there for weeks," Mr. Schulte said. "Then the ultimate insult would come when the bank calls back three weeks later and says, 'thanks but no thanks.'"

Now the company has obtained one of only 14 licenses that grant nonbanks the right to make SBA loans directly.

Bankers complain that nonbanks aren't subject to the same regulatory scrutiny as banks. But that's exactly what John Schulte, president and co-founder of Small Business Loan Source, intends to take advantage of.

His company promises 48-hour turnaround time for loan applications for the agency's popular 7(a) loan program. Neither banks nor the giant companies specializing in SBA loans can promise the same, he said.

Mr. Schulte's company bought its license last month from Government Funding Corp. of Los Angeles for an undisclosed amount.

Now, Mr. Schulte said his company plans to open small branches around the United States, staffing two or three-person offices with experienced SBA loan officers he and partner Albert Johnson hope to lure away from banks.

The company has already opened an office in McAllen, Tex. Plans are under way to open offices in Orlando and Fort Lauderdale by next month, and in Austin, Dallas, San Antonio, Orange County, Calif., Los Angeles and Cleveland within three months. Branches in Atlanta, Kansas City, Phoenix and Portland are slated to open by mid-1996.

Mr. Schulte believes he can make $50 million in loans over the next 12 months. That would have put Small Business Loan Source among the top five SBA lenders for fiscal year 1995, said SBA spokesman Mike Stamler.

SBA preliminary figures show The Money Store Investment Corp. is still the agency's dominant lender, making 1,185 loans for a total of $403 million in the fiscal year that ended Sept. 30. In second place was Heller First Capital Corp. with 351 loans totaling $124 million. The largest bank lender was Banco Popular de Puerto Rico, which made 223 loans totaling $38 million.

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