American Express Co. has joined with AT&T Capital Corp. for its latest foray into small-business lending.

Through a joint venture called American Express CapitaFinance LLC, the companies will be offering equipment financing initially to the New York-based card issuer's 1.6 million small-business customers.

AT&T Capital, spun off last year by AT&T Corp. and already a major force in the small-business market, might later make other types of loans available through the joint venture, which plans to send out its first mail solicitations next week.

The $10 billion-asset AT&T Capital replaces Advanta Corp. as American Express' ally for financing office equipment, mainly because the former AT&T subsidiary is willing to make larger loans.

Augmenting its business card strategy, American Express is also approaching the small-business market cooperatively with banks. In September it began working with Banc One Corp. and Wells Fargo & Co. to offer $5,000 to $50,000 unsecured lines of credit which businesses can draw down by writing checks.

In the office equipment area, American Express CapitaFinance will typically provide financing after purchases are made on American Express cards. Card members would call AT&T Capital's customer service center to arrange terms.

American Express had been working with Advanta on an office equipment pilot since last March.

Among the differences between the two programs, Advanta capped leases during the pilot at $15,000, whereas AT&T Capital loans on purchased equipment will go up to $25,000, said Steven W. Alesio, president of American Express small-business services.

American Express owned the equipment leased in the Advanta deal; now the joint venture is extending credit on equipment purchased by the cardholder.

Also, American Express CapitaFinance plans to launch other initiatives in such areas as Small Business Administration guaranteed loans and auto leasing.

Advanta Corp. chief executive officer Alex W. "Pete" Hart said his company became aware American Express was looking at other suppliers three months ago, when it was in final negotiations with AT&T Capital. He said the two credit-granting companies take a very different approach to equipment financing.

Spring Hill, Pa.-based Advanta "by and large confines its leases to amounts no greater than $150,000, and American Express was hoping they would find a partner that would do $1 million or more. That's just not us," said Mr. Hart.

Mr. Alesio said, "The Advanta test was our first pilot looking into leasing as a line of business. We learned that the leasing opportunity looked large."

The first product will be linked directly to American Express' small- business cards, with financing terms ranging from one to five years.

Mr. Alesio said aside from the convenience of deferring payments at the point of purchase, "the real benefit to our customers is that they will have pre-approved leases."

Industry observers see American Express' alliance approach as a way to spread its risk of entering new markets.

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