Glendale Federal is preparing to launch a direct mail campaign in hopes of becoming a major player in the torrid California small-business banking market.

The $14 billion-asset thrift, headquartered outside Los Angeles, plans to send 20,000 preapproved offers for $50,000 credit lines in August to businesses located near its branch offices.

"We have very high targets for small business for this year," said Jason Carignan, Glendale marketing manager for business banking.

This fall Glendale's branch staff will follow up the direct mail campaign with telephone calls to help attract small-business deposit accounts, which generate more profits for the thrift.

Mr. Carignan said even a 3% response rate to its direct mail credit offers would help the thrift generate more than $25 million in additional small-business deposits.

But Charles Wendel, president of Financial Institutions Consulting in New York, said that banks need to give entrepreneurs more of an incentive to move their deposit accounts.

"It's very inconvenient for small-business owners to move their accounts, and the only reason they would do it is if their current bank really screws up," Mr. Wendel said.

The battle for small-business accounts is especially fierce in California where aggressive banks and nonbank lenders, such as Wells Fargo & Co. and the Money Store, fight for customers.

Wells Fargo pioneered direct mail credit offers to entrepreneurs in 1992. Since then the percentage of banks mailing credit offers has increased to 24%, according to the Consumer Bankers Association.

Glendale is marketing itself as a substitute for financial institutions such as Wells Fargo and Great Western Financial Corp., the target of a four-month takeover battle won by Washington Mutual Inc.

"There's still a lot of upheaval in the marketplace, and we are the alternative," Mr. Carignan said.

More than 17% of small-business owners switch banks after a merger, according to a survey by the National Federation of Independent Businesses.

Glendale formed its small-business division in 1995 but began aggressively promoting its services last year after Wells Fargo's troubled acquisition of First Interstate Bancorp.

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