In its first move into the small-business banking market, USAA Savings Bank will offer business loans and small-company credit cards by the end of the year, executives said.

The credit card bank, which is a unit of the $6.4 billion-asset thrift owned by San Antonio-based insurance company USAA, will start by marketing its small-business services to its customer base of active or retired military personnel and their families, said USAA Savings president and chief executive officer Robert Taylor.

USAA's entrance into the small-business market represents the growing competition from thrifts, mutual funds, insurance companies, and credit card issuers to serve entrepreneurs.

In the last year, Dime Bancorp, Fidelity Investments, Hartford Financial Services Group, and American Express Co. have made greater inroads into the small-business market.

Mr. Taylor said that USAA's decision to enter the arena made perfect sense. "A number of our members are coming out of the military or corporate world and starting small businesses," he said. "We are being responsive to their needs."

Bankers have long admired USAA for its strong customer service by telephone, mail, and personal computer.

The company offers insurance, credit cards, and investment products but the thrift only has one branch office, in San Antonio.

USAA also maintains a data base to track contact with customers to predict when they are likely to need a particular financial product.

"Cross-selling is a major tool for us," Mr. Taylor said.

Bankers at the Consumer Bankers Association Small Business Conference held here last week said USAA Savings' strong marketing skills, use of technology, and loyal customer base will help the company carve out a chunk of the small-business market.

"They'll do very well," said Don Pearson, a senior vice president at BankAmerica Corp. "They are going to be a fantastic competitor."

Marc A. Miller, a sales and service executive at the USAA thrift, said as many as 450,000 of the company's three million customers own small businesses.

"We're going after a very small niche," he said. "We already have the relationships and we'll just fill in the products."

But Marilyn Dahl, vice president for Norwest Bank Minnesota, said USAA Savings would also need to offer cash management services and deposit accounts to succeed in small-business banking. She said the market for credit products is already crowded and competition is driving margins down.

"If you just focus on credit, you're missing the boat," she said.

Mr. Taylor said USAA, which already offers commercial property and casualty insurance, has not determined how it would offer small-business deposit accounts without branches.

Joseph Scharfenberger, executive vice president in charge of small- business banking at Chase Manhattan Corp., said USAA remote delivery methods would hamper efforts to gain small-business customers, who rely on and expect relationships with bank branch personnel.

"We respect USAA for what they have done for consumers, but banks still have the branches and that's what small-business owners look for," he said.

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