Small-business powerhouse Wells Fargo & Co. is heading to the Great White North.

San Francisco-based Wells will begin mailing small-business loan applications to Canada by yearend, a bank spokeswoman said.

"We welcome the competition," said Maurice Hudon, senior vice president of personal and commercial lending for Bank of Montreal.

Wells Fargo, the second-largest bank lender to small business in the United States, shook up the industry when it developed its own credit- scoring system and mailed preapproved loan applications.

So far only two Canadian banks, Royal Bank of Canada and Bank of Montreal make small-business loans using credit scoring, which is a cornerstone of Wells' small-business push. Bank of Montreal also makes loans by telephone and on the Internet.

But John Leckie, senior vice president of small-business banking at Toronto-Dominion Bank said other Canadian banks would follow Wells' lead on tactics.

"There is no question their one-page application is a simple, easy process," Mr. Leckie said. "We're all heading in the same direction; they are just a step ahead."

Mr. Leckie said Wells may not be able to compete on price in Canada. The prime rate there is 4.75%, and small-business loans are usually two percentage points higher than prime.

The seven largest banks in Canada make 87% of the bank loans to small businesses, according to the Canadian Bankers Association.

By contrast, the U.S. market is more fragmented; the top 50 banks make 50% of the small-business bank loans, according to an American Banker study.

"The Canadian banks have existed in a market that is basically an oligopoly," said Charles Wendel, president of Financial Institutions Consulting in New York.

"A bank like Wells coming in with a different, more streamlined distribution segment could be attractive to a segment of customers looking for credit," Mr. Wendel said.

Wells Fargo pioneered direct-mail solicitations in the United States in 1992 with $25,000 business credit lines and expanded its efforts into a nationwide mail campaign in 1994.

Since then it has jumped from 11th place to second-largest bank lender to small businesses, with $3.5 billion of loans outstanding. It also has raised the credit limit to $75,000.

About 284,900, or 40%, of the business borrowers in Canada have loans for less than $25,000, according to the Canadian Bankers Association. Another 15% have loans of $25,000 to $50,000.

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