NEW YORK - Escalating the New York City war for small-business customers, Citibank said Monday it is making $1 billion in loans available for firms in the New York metropolitan area.

The program, launched over the weekend with full-page ads in The New York Times and other newspapers, includes a variety of products designed for small businesses and professionals.

The nation's biggest bank said it is offering products at rates "as low as 1% over the prime."

"We have the resources and the expertise to create full financial relationships with small business - and that, of course, must include credit," said Pamela P. Flaherty, executive in charge of Citibank's eastem branch division.

Flurry of Cold-Calling

Citibank's major rivals - including Chemical and Chase Manhattan - have been conducting advertising and cold-calling blitzes in the past year to convince potential customers that there is no credit crunch. However, hankers said they usually find that firms seeking the loans are not creditworthy.

Citibank's $1 billion commitment for 1993 is devoted to businesses with less than $20 million in sales and to professionals like doctors and lawyers.

Loans will be made throughout the metropolitan area, including New York City, Long Island, and Westchester, Rockland and Orange counties.

The money will be lent through standard small-business products such as business credit lines; monthly payment business loans; Business Checking Plus, which is used for funds availability and overdraft protection, and customized loans for special purposes and industries.

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