Visa said it will begin promoting a small-business debit card this month and is now testing a line of credit in a pilot program with five banks.

Bruno Perreault, senior vice president of commercial card products for Visa U.S.A., said 15 banks offered the debit card to 150,000 entrepreneurs as part of a pilot program begun 15 months ago. He expects to have 600,000 debit cardholders by yearend.

"It's an untapped market," Mr. Perreault said. "Banks can convert spending that is done with cash or checks to card purchases."

According to Visa's estimates, small businesses nationwide spend $250 billion a year on travel and entertainment, but only 11% of that spending is done with credit or debit cards.

Banks would offer the Visa credit lines to small-business customers with either credit or debit cards, Mr. Perreault said. He declined to name the banks involved in the pilot program.

Typically, entrepreneurs use credit lines to finance large purchases and use credit cards for smaller expenses, Mr. Perreault said. Credit lines often have higher limits and lower interest rates than credit cards, he added.

The banks will set interest rates and credit limits, he said.

Mr. Perreault said banks could save money by offering Visa credit lines because they could use the same loan monitoring and billing software as they now use for credit cards.

Banks spend $1,200 a year to manage a typical small-business credit line, but would only spend $400 a year to manage a Visa credit line, Mr. Perreault said.

"It's a very attractive concept," said Charles Wendel, president of Financial Institutions Consulting in New York. "It would make a lot of sense for banks to piggyback on Visa."

Mr. Wendel said the product would appeal to smaller banks that do not now offer business credit lines. Visa could use it as a springboard to introduce other products, such as small-ticket leasing, he said.

According to a 1997 study of 400 small businesses by Financial Institutions, 45% of the companies surveyed provided employees with a credit card for business expenses. Nearly half of those businesses used American Express, 31% used Visa, and 19% used MasterCard.

American Express cannot offer debit cards because it does not offer small-business checking accounts. Amex also does not have the kind of relationships with banks that Visa has.

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