Great Western Financial Corp., is taking a giant leap into the crowded market for small-business loans.

The nation's second-largest thrift formally opened its business banking unit last week and unveiled an unsecured credit line with a maximum limit of $50,000 and 24-hour approval time.

By boldly predicting it will hold $1 billion in small business loans within three years, Chatsworth, Calif.-based Great Western has become the most aggressive of the big California thrifts trying to enter the small- business fray.

"We have a lot of small businesses that bank with us, and we never have offered them loan products," said Daniel J. Morefield, a Great Western senior vice president who is running the new unit. "Now we're doing that."

Great Western's move into small-business banking comes at a time when thrifts are moving into business lines than are more profitable than mortgage lending. Small business is seen as a particularly lucrative niche, thanks to falling origination costs.

While $43.7 billion-asset Great Western is new to small-business banking, the executive leading the charge is not. Mr. Morefield oversaw the small-business lending effort at First Interstate Bank of California from 1992 until this spring.

He argued that the thrift can become an industry leader by leveraging its newly obtained expertise and a deposit base that includes an estimated 96,000 merchants.

The credit line is the first of a wave of products that Great Western will roll out over the next 12 to 18 months to complement its current meager offering of deposit and checking accounts, Mr. Morefield said. Offerings will include credit and deposit products, as well as cash- management services. The thrift said it intends to offer a small-business credit card before the end of this year.

Great Western said it also plans to join the latest fad in small- business banking with a direct-mail offer of prequalified and preapproved credit lines to companies - both inside and outside its California and Florida marketplaces.

"We'll aggressively be going down the direct-mail path," Mr. Morefield said. "The team we have put together has extensive prequalified credit experience."

So far, Mr. Morefield's team consists of 17 people, eight of whom worked together at First Interstate before it was acquired by Wells Fargo & Co.

Mr. Morefield said the group's business experience will allow Great Western to overcome the marketplace disadvantage of having only negligible experience in small-business banking.

Nevertheless, he sees tough competitive battles ahead, particularly in California where the two San Francisco-based goliaths, Wells and BankAmerica Corp., dominate the state's small-business lending.

That will be a formidable task. According to June 1995 figures from Sheshunoff Information Services, Wells had a $1.9 billion small-business loan portfolio in California alone while BankAmerica's was $1.1 billion. Moreover, BankAmerica has announced it will lend $4.5 billion to California businesses over the next three years.

Competition will heat up in the near future as Great Western's sister thrift companies Glendale Federal Bank and H.F. Ahmanson & Co. step up their small-business efforts. Home Savings of America, the Ahmanson thrift subsidiary, promises to be more of a player once it completes its acquisition of 61 former First Interstate branches later this month.

'That's going to jump-start us in terms of small-business banking," said Mary Trigg, director of public relations for Ahmanson.

Small wonder that Mr. Morefield said he sees more opportunity in the Florida market, where Great Western has 121 branches and 35,000 small- business depositors.

"At the end of the day, we have to admit we have some of the best small-business competitors in California," Mr. Morefield said. "Florida hasn't been as aggressively marketed."

Bankers in both states will watch Great Western's incursions with interest, but predictions of the thrift's performance are mixed.

Donald Hance, a former Wells executive who is trying to turn Los Angeles-based Unionbancal Corp. into yet another California small-business player, said Great Western might pull it off.

"They're not much of a presence in small business right now, but it looks like they've hired some good people," he said.

But a Florida community banker, who asked not to be identified, expected the out-of-state thrift to flop.

"They're a big, bureaucratic stodgy organization without much of a profile in that community," he said.

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