When it comes to small-business lending, Michael Pilot doesn't consider Money Store Investment Corp. his primary competitor.
It's community banks that Mr. Pilot, 33, the president of GE Capital Small Business Finance Corp., sees as his main challengers.
"Our true competition is local community banks, who have a history and a stake in the markets they're in," Mr. Pilot said in a recent interview.
Mr. Pilot said being a local provider of government-backed Small Business Administration loans will be the key to his company's success.
GE Capital Corp.'s small-business affiliate, based in St. Louis, was spawned in February 1995 when the parent bought ITT Corp.'s Small Business Finance Corp.
Mr. Pilot said GE had considered getting into small-business lending for several years before buying the ITT division. But it never found the right opportunity when any of the 14 operations holding nonbank SBA licenses was up for sale.
"We didn't feel we understood the business (well enough) to jump in cold," Mr. Pilot said. "We would have just been licensed to do something we didn't know how to do."
The ITT operation "needed a little horsepower," Mr. Pilot said, noting that ITT's decision to sell had hurt the unit's business. Nonetheless, the acquisition bought GE officials the expertise needed to function as SBA lenders. Mr. Pilot, an 11-year employee of GE Capital, had previously been Rocky Mountain regional manager of its commercial equipment financing division.
GE Capital's SBA loan portfolio was a relatively small $678 million at Sept. 30. But analysts who cover finance companies say because of GE's enormous size it can be a powerful competitor.
"They're such a powerhouse," said Katrina Blecher, an analyst at Gruntal & Co. "Anyone who competes with them knows that."
In fiscal 1994, ITT was the third-largest originator of SBA 7(a) loans (the agency's most popular), approving $110 million. By their own estimate, GE officials said the unit's dollar volume of such loans (which are guaranteed by the SBA up to $750,000) dropped to $64 million in fiscal 1995.
Money Store, which made 1,185 7(a) loans totaling $403 million, was the largest such lender in fiscal 1995. Heller First Capital Corp., a California-based company, was No. 2, making 351 loans totaling $120 million.
GE's goal is to lend $250 million under this program in fiscal 1996. GE also makes other types of SBA loans, as well as non-SBA loans.
To accomplish its goal, GE Capital in the past 12 months doubled local offices, from 20 to 40, and the sales force in its Small Business Finance Corp. It also added regional offices in New York, Charlotte, N.C., and Dallas to the existing offices in St. Louis and San Diego. Mr. Pilot said he would like to double the number of offices again within a year.
Typical loan amounts are $100,000 to $1.2 million. GE thinks the unit can specialize in lending to manufacturing and technology companies.
Competition among small-business lenders has heated in recent years as nonbank giants, such as AT&T Corp. and Ford Motor Co., got into the game.
Though he considers community banks his toughest competition, Mr. Pilot still views the other captive finance companies as important rivals.
With its backing from a large parent, GE's small-business financing subsidiary could itself become a big company some day, Mr. Pilot said. "We have the resources of one of the biggest companies in the world," he noted.