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                                                                    EXHIBIT 10.7





                                                                       EXECUTION

                                 LOAN AGREEMENT

                                  May 15, 1996



PMC Capital, Inc.
17290 Preston Road
Dallas, Texas  75252

Ladies and Gentlemen:

         This Loan Agreement (this "Loan Agreement") will serve to set forth
the terms of the financing transactions by and between PMC CAPITAL, INC., a
Florida corporation ("Borrower"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION
("Bank"):

         1.      CREDIT FACILITY.  Subject to the terms and conditions set
forth in this Loan Agreement and the other agreements, instruments and
documents evidencing, governing, and/or pertaining to the Loan, as hereinafter
defined (collectively, together with this Loan Agreement, referred to
hereinafter as the "Loan Documents"), Bank hereby agrees to lend to Borrower,
on a revolving basis from time to time during the period commencing on the date
hereof and continuing through the Maturity Date, such amounts as Borrower may
request hereunder; provided, however, the total principal amount outstanding at
any time shall not exceed $15,000,000 (the "Revolving Line of Credit").
Subject to the terms and conditions hereof, Borrower may borrow, repay and
reborrow hereunder.  The sums advanced under the Revolving Line of Credit shall
be used for the funding of Commercial Loans by Borrower or any of its
Subsidiaries.  All advances under the Revolving Line of Credit shall be
collectively called the "Loan".  Any request by Borrower of an advance
hereunder shall be received by Bank not later than 10:00 a.m., Dallas, Texas
time, on the requested date of such advance.  Each request by Borrower for an
advance shall specify (i) the aggregate amount of such requested advance, and
(ii) the purpose for such advance if it is other than the funding of Commercial
Loans, with such requests to be in the form attached hereto as Exhibit A.  Any
request for an advance received by Bank after 10:00 a.m., Dallas, Texas time
will be deemed to be a request for Bank to advance funds on the next following
Business Day.
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May 15, 1996
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         2.      PROMISSORY NOTE.  The Loan shall be evidenced by a promissory
note (together with any renewals, extensions and increases thereof, the "Note")
duly executed by Borrower and payable to the order of Bank, in the form
attached hereto as Exhibit A.  Interest on the Note shall accrue at the rate
set forth therein.  The principal of and interest on the Note shall be due and
payable in accordance with the terms and conditions set forth in the Note and
in this Loan Agreement.

         3.      REPRESENTATIONS AND WARRANTIES.  Borrower hereby represents
and warrants, and upon each request for an advance under the Revolving Line of
Credit further represents and warrants, to Bank as follows:

                 (a)      Existence.  Borrower is a corporation duly organized,
         validly existing and in good standing under the laws of the State of
         Florida and all other states where qualification is required, and has
         all requisite power and authority to execute and deliver the Loan
         Documents.

                 (b)      Binding Obligations.  The execution, delivery, and
         performance of this Loan Agreement and all of the other Loan Documents
         by Borrower have been duly authorized by all necessary action by
         Borrower, and constitute legal, valid and binding obligations of
         Borrower, enforceable in accordance with their respective terms,
         except as limited by bankruptcy, insolvency or similar laws of general
         application relating to the enforcement of creditors' rights and
         except to the extent specific remedies may generally be limited by
         equitable principles.

                 (c)      No Consent.  The execution, delivery and performance
         of this Loan Agreement and the other Loan Documents, and the
         consummation of the transactions contemplated hereby and thereby, do
         not (i) conflict with, result in a violation of, or constitute a
         default under (A) any provision of its articles or certificate of
         incorporation or bylaws or any agreement or other instrument binding
         upon Borrower, or (B) any law, governmental regulation, court decree
         or order applicable to Borrower
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May 15, 1996
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         (including without limitation, the Investment Company Act of 1940, as
         amended), or (ii) require the consent, approval or authorization of
         any third party.

                 (d)      Financial Condition.  Each financial statement of
         Borrower supplied to the Bank truly discloses and fairly presents
         Borrower's Consolidated financial condition as of the date of each
         such statement.  There has been no material adverse change in such
         financial condition or results of operations of Borrower subsequent to
         the date of the most recent financial statement supplied to the Bank.

                 (e)      Litigation.  There are no actions, suits or
         proceedings, pending or, to the knowledge of Borrower, threatened
         against or affecting Borrower or any Subsidiary of Borrower or their
         properties, before any court or governmental department, commission or
         board, which, if determined adversely to Borrower or such Subsidiary,
         would have a material adverse effect on the financial condition,
         properties, or operations of Borrower.

                 (f)      Taxes; Governmental Charges.  Borrower has filed all
         federal, state and local tax reports and returns required by any law
         or regulation to be filed by it and has either duly paid all taxes,
         duties and charges indicated due on the basis of such returns and
         reports, or made adequate provision for the payment thereof, and the
         assessment of any material amount of additional taxes in excess of
         those paid and reported is not reasonably expected.

         4.      CONDITIONS PRECEDENT TO ADVANCES.  Bank's obligation to make
any advance under this Loan Agreement and the other Loan Documents shall be
subject to the conditions precedent that, as of the date of such advance and
after giving effect thereto (i) all representations and warranties made to Bank
in this Loan Agreement and the other Loan Documents shall be true and correct,
as of and as if made on such date, (ii) no material adverse change in the
individual or Consolidated financial condition of Borrower since the effective
date of the most recent financial statements furnished to Bank by Borrower
shall have occurred and
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be continuing, (iii) no event has occurred and is continuing, or would result
from the requested advance, which with notice or lapse of time, or both, would
constitute an Event of Default, and (iv) Bank's receipt of all Loan Documents
appropriately executed by Borrower and all other proper parties.

         5.      AFFIRMATIVE COVENANTS.  Until (i) the Note and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) Bank has no further
commitment to lend hereunder, Borrower agrees and covenants that it will,
unless Bank shall otherwise consent in writing:

                 (a)      Accounts and Records.  Maintain its books and records
         in accordance with generally accepted accounting principles.

                 (b)      Right of Inspection.  Permit Bank to visit its
         properties and installations and to examine, audit and make and take
         away copies or reproductions of Borrower's books and records, at all
         reasonable times.  Such examinations, audits and preparation of copies
         will be paid by Bank.

                 (c)      Right to Additional Information.  Furnish Bank with
         such additional information and statements, lists of assets and
         liabilities, tax returns, and other reports with respect to Borrower's
         individual and Consolidated financial condition and business
         operations as Bank may request from time to time.

                 (d)      Compliance with Laws.  Conduct its business, and
         cause its Subsidiaries to conduct their businesses, in an orderly and
         efficient manner consistent with good business practices, and perform
         and comply with all statutes (including without limitation, the
         Investment Company Act of 1940, as amended), rules, regulations and/or
         ordinances imposed by any governmental unit upon Borrower, its
         Subsidiaries, their businesses, operations and properties (including
         without limitation, all applicable environmental statutes, rules,
         regulations and ordinances).
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May 15, 1996
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                 (e)      Taxes.  Pay and discharge when due all of its
         indebtedness and obligations, including without limitation, all
         assessments, taxes, governmental charges, levies and liens, of every
         kind and nature, imposed upon Borrower, its Subsidiaries or their
         properties, income, or profits, prior to the date on which penalties
         would attach, and all lawful claims that, if unpaid, might become a
         lien or charge upon any of Borrower's or any of its Subsidiaries'
         properties, income, or profits; provided, however, Borrower will not
         be required to pay and discharge any such assessment, tax, charge,
         levy, lien or claim so long as (i) the legality of the same shall be
         contested in good faith by appropriate judicial, administrative or
         other legal proceedings, and (ii) Borrower shall have established on
         its books adequate reserves with  respect to such contested
         assessment, tax, charge, levy, lien or claim in accordance with
         generally accepted accounting principles, consistently applied.

                 (f)      Insurance.  Maintain insurance with respect to its
         properties and business against such contingencies and casualties, of
         such types (including fire and casualty, public liability, larceny,
         embezzlement, and other criminal misappropriation insurance) and in
         such amounts and with such carriers as are acceptable to Bank.

                 (g)      Notice of Indebtedness.  Promptly inform Bank of the
         creation, incurrence or assumption by Borrower of any actual or
         contingent liabilities not permitted under this Loan Agreement.

                 (h)      Notice of Litigation.  Promptly after the
         commencement thereof, notify Bank of all actions, suits and
         proceedings before any court or any governmental department,
         commission or board affecting Borrower, any of its Subsidiaries or any
         of their properties in which an adverse decision could have a material
         adverse effect upon Borrower's individual or Consolidated financial
         conditions, businesses or operations.
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May 15, 1996
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                 (i)      Notice of Material Adverse Change.  Promptly inform
         Bank of (i) any and all material adverse changes in Borrower's
         individual or Consolidated financial condition, and (ii) all claims
         made against Borrower or any of its Subsidiaries which could
         materially affect the individual or Consolidated financial condition
         of Borrower.

                 (j)      Additional Documentation.  Execute and deliver, or
         cause to be executed and delivered, any and all other agreements,
         instruments or documents which Bank may reasonably request in order to
         give effect to the transactions contemplated under this Loan Agreement
         and the other Loan Documents.

                 (k)      Repayment of Intercompany Debt.  Cause each of its
         Subsidiaries to apply all net proceeds from the sale of any Commercial
         Loan to indebtedness then owed by such Subsidiary to Borrower,
         provided that said repayment is not in conflict with any statutes,
         rules and/or regulations imposed by any governmental unit upon
         Borrower.

         6.      NEGATIVE COVENANTS.  Until (i) the Note and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower will not, without the prior written
consent of Bank:

                 (a)      Nature of Business.  Make any material change in the
         nature of its business as carried on as of the date hereof.

                 (b)      Indebtedness.  Create, incur or assume any
         indebtedness for borrowed money or issue or assume any other note,
         debenture, bond or other evidences of indebtedness, or guarantee any
         such indebtedness or such evidences of indebtedness of others, other
         than (i) borrowings from Bank, and (ii) borrowings outstanding on the
         date hereof and disclosed in writing to Bank.
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May 15, 1996
Page 7




                 (c)      Liquidations, Mergers, Consolidations. Liquidate,
         merge or consolidate with or into any other entity.

                 (d)      Liens.  Create or incur any lien or encumbrance on
         any of its assets, other than (i) liens and security interest securing
         indebtedness owing to Bank, (ii) liens for taxes, assessments or
         similar charges which are (1) not yet due or (2) being contested in
         good faith by appropriate proceedings and for which Borrower has
         established adequate reserves, and (iii) liens and security interest
         existing as of the date hereof which have been disclosed to and
         approved by the Bank in writing.

                 (e)      Transfer of Ownership.  Permit the sale or other
         disposition of all or substantially all of the outstanding capital
         stock or property of Borrower.

                 (f)      Transactions with Affiliates.  Enter into any
         transaction, including, without limitation, the purchase, sale or
         exchange of property or the rendering of any service, with any
         Affiliate (as hereinafter defined) of Borrower, except in the ordinary
         course of and pursuant to the reasonable requirements of Borrower's
         business and upon fair and reasonable terms no less favorable to
         Borrower than would be obtained in a comparable arm's-length
         transaction with a person or entity not an Affiliate of Borrower.

         7.      FINANCIAL COVENANTS.  Until (i) the Note and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower will maintain the following financial
covenants:

                 (a)      Net Worth.  Borrower will maintain, at all times, Net
         Worth of not less than $63,000,000.

                 (b)      Liabilities/Net Worth.  Borrower will maintain, at
         all times, a ratio of (i) total liabilities to (ii) Net Worth of not
         greater than 2.0 to 1.0.
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May 15, 1996
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                 (c)      Maximum Delinquencies.  Borrower will maintain, at
         all times, a Delinquency Ratio (expressed as a percentage) not in
         excess of nine percent (9%).  The Delinquency Ratio shall be computed
         by dividing (i) the aggregate outstanding principal amount of
         Delinquent Loans owned by Borrower and its Subsidiaries by (ii) the
         sum of (x) the aggregate outstanding principal amount of Commercial
         Loans owned by Borrower and its Subsidiaries plus (y) assets acquired
         by Borrower and its Subsidiaries in satisfaction of debt, including
         any assets acquired through foreclosure, by deed-in-lieu of
         foreclosure, liquidation or other similar actions.

                 (d)      Asset Coverage Ratio.  Borrower will maintain, at all
         times, an Asset Coverage Ratio of not less than 1.75 to 1.0.  "Asset
         Coverage Ratio" means the ratio of (i) Borrower's cash and cash
         equivalents plus the aggregate outstanding principal balance of
         Performing Commercial Loans then owned by Borrower or its Subsidiaries
         less the aggregate outstanding amount of "B pieces" to (ii) the
         outstanding principal amount of Senior Debt.  The Asset Coverage Ratio
         shall be calculated on a Consolidated basis.

                 (e)      Maximum Net Charge-offs.  Borrower will maintain, as
         of the end of each fiscal year, a Maximum Net Charge-Offs Ratio
         (expressed as a percentage) of not greater than 2%.  The Maximum Net
         Charge-Offs Ratio shall be computed by dividing (i) the sum of (x) the
         Net Amount of Charge-Offs plus (y) the change in unrealized
         depreciation and amortization on Borrower's investments during such
         fiscal year by (ii) the average of the outstanding principal balance
         of the Commercial Loans owned by Borrower and its Subsidiaries during
         such fiscal year.

         8.      REPORTING REQUIREMENTS.  Until (i) the Note and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower will, unless Bank shall otherwise
consent in writing, furnish to Bank:
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                 (a)      SEC Filings.  As soon as available, and in any event
         (i) within sixty days after the end of each of the first three fiscal
         quarters of Borrower, a copy of Borrower's 10-Q, (ii) within 120 days
         after the end of each fiscal year of Borrower, a copy of Borrower's
         10-K, and (iii) promptly upon their becoming available, copies of all
         registration statements, other periodic reports and statements and
         schedules filed by Borrower with any securities exchange, the
         Securities and Exchange Commission or any similar governmental
         authority.

                 (b)      Annual Financial Statements.  As soon as available
         and in any event within 120 days after the end of each fiscal year of
         Borrower, a Consolidated and consolidating balance sheet and income
         statement of Borrower as of the end of such fiscal year, in each case
         audited by independent public accountants of recognized standing
         acceptable to Bank.

                 (c)      Compliance Certificate.  A certificate signed by the
         president, chief financial officer or executive vice president of
         Borrower, within 60 days after the end of each fiscal quarter, stating
         that Borrower is in full compliance with all of its obligations under
         this Loan Agreement and all other Loan Documents and is not in default
         of any term or provisions hereof or thereof, and demonstrating
         compliance with all financial ratios and covenants set forth in this
         Loan Agreement.

         9.      EVENTS OF DEFAULT.  Each of the following shall constitute an
"Event of Default" under this Loan Agreement:

                 (a)      The failure, refusal or neglect of Borrower to pay
         when due any part of the principal of, or interest on, the Note or any
         other indebtedness or obligations owing to Bank by Borrower from time
         to time and such failure continues for a period of fifteen (15) days
         after notice of such failure is given by Lender to Borrower.
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                 (b)      The failure of Borrower to timely and properly
         observe, keep or perform any covenant, agreement, warranty or
         condition required herein or in any of the other Loan Documents and
         such failure remains unremedied for a period of fifteen (15) days
         after notice of such failure is given by Lender to Borrower.

                 (c)      The occurrence of an event of default under any of
         the other Loan Documents or under any other agreement now existing or
         hereafter arising between Bank and Borrower.

                 (d)      Any representation contained herein or in any of the
         other Loan Documents made by Borrower is false or misleading in any
         material respect and remains unremedied after notice is given by
         Lender to Borrower.

                 (e)      The occurrence of any event which permits the
         acceleration of the maturity of any indebtedness owing by Borrower to
         any third party under any agreement or understanding.

                 (f)      If Borrower: (i) becomes insolvent, or makes a
         transfer in fraud of creditors, or makes an assignment for the benefit
         of creditors, or admits in writing its inability to pay its debts as
         they become due; (ii) generally is not paying its debts as such debts
         become due; (iii) has a receiver, trustee or custodian appointed for,
         or take possession of, all or substantially all of the assets of such
         party, either in a proceeding brought by such party or in a proceeding
         brought against such party and such appointment is not discharged or
         such possession is not terminated within sixty (60) days after the
         effective date thereof or such party consents to or acquiesces in such
         appointment or possession; (iv) files a petition for relief under the
         United States Bankruptcy Code or any other present or future federal
         or state insolvency, bankruptcy or similar laws (all of the foregoing
         hereinafter collectively called "Applicable Bankruptcy Law") or an
         involuntary petition for relief is filed against such party under any
         Applicable Bankruptcy Law and such involuntary petition is not
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         dismissed within sixty (60) days after the filing thereof, or an order
         for relief naming such party is entered under any Applicable
         Bankruptcy Law, or any composition, rearrangement, extension,
         reorganization or other relief of debtors now or hereafter existing is
         requested or consented to by such party; (v) fails to have discharged
         within a period of thirty (30) days any attachment, sequestration or
         similar writ levied upon any property of such party; or (vi) fails to
         pay within thirty (30) days any final money judgment against such
         party.

                 (g)      The liquidation, dissolution, merger or consolidation 
         of Borrower.

                 (h)      The entry of any judgment against Borrower or the
         issuance or entry of any attachment or other lien against any of the
         property of Borrower for an amount in excess of $200,000, if
         undischarged, unbonded or undismissed within thirty (30) days after
         such entry.

                 (i)      Either Lance Rosemore ceases to hold the position of
         Chief Executive Officer or Andrew Rosemore ceases to hold the position
         of Chief Operating Officer.

Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative.

         10.     REMEDIES.  Upon the occurrence of any one or more of the
foregoing Events of Default, (a) the entire unpaid balance of principal of the
Note, together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Bank by Borrower at such time shall, at the option of
Bank, become immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate, notice of
acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, and (b) Bank may, at its option, cease further
advances under the Note; provided, however, concurrently and automatically with
the occurrence of an Event of Default under subparagraph (f) in the immediately
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preceding paragraph (i) further advances under the Note shall cease, and (ii)
the Note and all other indebtedness owing to Bank by Borrower at such time
shall, without any action by Bank, become due and payable, without further
notice, demand, presentation, notice of dishonor, notice of acceleration,
notice of intent to accelerate, protest or notice of protest of any kind, all
of which are expressly waived by Borrower.  All rights and remedies of Bank set
forth in this Loan Agreement and in any of the other Loan Documents may also be
exercised by Bank, at its option to be exercised in its sole discretion, upon
the occurrence of an Event of Default.

         11.     DEFINITIONS.  For purposes of this Loan Agreement, the
following terms have the meanings given below:

                 "Affiliate" means any individual or entity directly or
         indirectly controlling, controlled by, or under common control with,
         another individual or entity.

                 "B pieces" means that portion of Commercial Loans retained by
         Borrower or its Subsidiaries out of Commercial Loans sold under an
         asset securitization.

                 "Commercial Loans" means loans made by Borrower or any of its
         Subsidiaries to any person other than an Affiliate of Borrower for
         business or commercial purposes and not for family, consumer or
         household use, which loans are secured by real property or personal
         property.

                 "Consolidated" refers to the consolidation of any person or
         entity, in accordance with generally accepted accounting principles,
         with its properly consolidated subsidiaries.

                 "Delinquent Loans" means, at any time, the sum of (x) the
         aggregate unpaid principal amount of Commercial Loans owned by
         Borrower or any of its Subsidiaries which are thirty-one (31) or more
         days delinquent (whether under the initial payment plan or a modified
         payment plan established pursuant to a workout) plus (y) assets
         acquired in
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         satisfaction of debt, including any assets acquired through
         foreclosure, by deed-in-lieu of foreclosure, liquidation or other
         similar actions, plus (z) Commercial Loans then subject to any legal
         suit, arbitration proceeding or other similar action or proceeding.

                 "Maturity Date" means May 15, 1998.

                 "Net Amount of Charge-Offs" means, for any fiscal year, the
         aggregate amount of Commercial Loans charged-off (without reduction)
         by Borrower or its Subsidiaries during such fiscal year minus the
         aggregate amount of Commercial Loans previously charged-off by
         Borrower or its Subsidiaries that is recovered during such fiscal
         year.

                 "Net Worth" means with respect to Borrower, as of any date,
         Borrower's total assets less total liabilities.

                 "Performing Commercial Loans" means a Commercial Loan with
         respect to which (i) no payment of principal or interest is thirty-one
         (31) days or more past due (whether under the initial payment plan or
         a modified payment plan established pursuant to a workout), and (ii)
         there is no claim of fraud in connection with the origination of such
         Commercial Loan.

                 "Senior Debt" means (i) the Loan, (ii) all obligations of
         Borrower issued to certain insurance companies per attached Schedule
         1, (iii) all other obligations of Borrower for borrowed money and (iv)
         all liabilities of Borrower under any guarantee or endorsement of the
         type of debt described in the immediately preceding clause (iii).

                 "Subsidiary" means, with respect to any person or entity, any
         corporation, association, partnership, joint venture or other business
         or corporate entity, enterprise or organization which is directly or
         indirectly (through one or more intermediaries) controlled by or owned
         fifty percent or more by such person or entity.
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         12.     RIGHTS CUMULATIVE.  All rights of Bank under the terms of this
Loan Agreement shall be cumulative of, and in addition to, the rights of Bank
under any and all other agreements between Borrower and Bank (including, but
not limited to, the other Loan Documents), and not in substitution or
diminution of any rights now or hereafter held by Bank under the terms of any
other agreement.

         13.     WAIVER AND AGREEMENT.  Neither the failure nor any delay on
the part of Bank to exercise any right, power or privilege herein or under any
of the other Loan Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of such right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.  No waiver of any provision in this Loan Agreement or in any of the
other Loan Documents and no departure by Borrower therefrom shall be effective
unless the same shall bein writing and signed by Bank, and then shall be
effective only in the specific instance and for the purpose for which given and
to the extent specified in such writing.  No modification or amendment to this
Loan Agreement or to any of the other Loan Documents shall be valid or
effective unless the same is signed by the party against whom it is sought to
be enforced.

         14.     BENEFITS.  This Loan Agreement shall be binding upon and inure
to the benefit of Bank and Borrower, and their respective successors and
assigns, provided, however, that Borrower may not, without the prior written
consent of Bank, assign any rights, powers, duties or obligations under this
Loan Agreement or any of the other Loan Documents.

         15.     NOTICES.  All notices, requests, demands or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and given by (i) personal delivery, (ii) expedited delivery
service with proof of delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the intended
addressee at the address set forth on the signature page hereof and shall be
deemed to have been received either, in the case of personal delivery, as of
the time of personal delivery, in the
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case of expedited delivery service, as of the date of first attempted delivery
at the address and in the manner provided herein, or in the case of mail, upon
deposit in a depository receptacle under the care and custody of the United
States Postal Service.  Either party shall have the right to change its address
for notice hereunder to any other location within the continental United States
by notice to the other party of such new address at least thirty (30) days
prior to the effective date of such new address.

         16.     CONSTRUCTION.  This Loan Agreement and the other Loan
Documents have been executed and delivered in the State of Texas, shall be
governed by and construed in accordance with the laws of the State of Texas,
and shall be performable by the parties hereto in the county in Texas where the
Bank's address set forth on the signature page hereof is located.

         17.     INVALID PROVISIONS.  If any provision of this Loan Agreement
or any of the other Loan Documents is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be fully
severable and the remaining provisions of this Loan Agreement or any of the
other Loan Documents shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance.

         18.     EXPENSES.  Borrower shall pay all costs and expenses
(including, without limitation, reasonable attorneys' fees) in connection with
(i) the preparation, negotiation and execution of this Loan Agreement and the
other Loan Documents, which costs and expenses shall not exceed $5,000, (ii)
any action required in the course of administration of the indebtedness and
obligations evidenced by the Loan Documents, and (iii) any action in the
enforcement of Bank's rights upon the occurrence of Event of Default.

         19.     PARTICIPATION OF THE LOAN.  Borrower agrees that Bank may, at
its option, sell interests in the Loan and its rights under this Loan Agreement
to a financial institution or institutions and, in connection with each such
sale, Bank may
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disclose any financial and other information available to Bank concerning
Borrower to each perspective purchaser.

         20.     ENTIRE AGREEMENT.  This Loan Agreement (together with the
other Loan Documents) contains the entire agreement among the parties regarding
the subject matter hereof and supersedes all prior written and oral agreements
and understandings among the parties hereto regarding same.

         21.     CONFLICTS.  In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the other Loan Documents,
the terms and provisions contained in this Loan Agreement shall be controlling.

         22.     COUNTERPARTS.  This Loan Agreement may be separately executed
in any number of counterparts, each of which shall be an original, but all of
which, taken together, shall be deemed to constitute one and the same
instrument.

         23.     RENEWAL AND EXTENSION.  On or before April 15th of each
calendar year which occurs prior to the Maturity Date (as the same may have
been extended hereunder) but no sooner than thirty (30) days preceding such
date, Borrower may submit a request to Bank to extend the Maturity Date for an
additional calendar year (e.g., Borrower may submit, between March 15, 1997 and
April 15, 1997, the first of such requests to extend the Maturity Date to May
15, 1999, being one year after the original Maturity Date), by delivering to
Bank a written request to extend the Maturity Date.  Bank may decline to grant
such extension for any reason in its sole and absolute discretion.  IF BANK
DECLINES TO EXTEND THE MATURITY DATE, BORROWER SHALL BE REQUIRED TO REPAY THE
ENTIRE PRINCIPAL BALANCE OF THE OBLIGATIONS AND ALL ACCRUED UNPAID INTEREST ON
THE MATURITY DATE AS THE SAME MAY PREVIOUSLY HAVE BEEN EXTENDED IN ACCORDANCE
HEREWITH.  BANK IS UNDER NO OBLIGATION TO EXTEND OR REFINANCE THE LOAN AT THAT
TIME.  IF BANK AGREES TO EXTEND THE LOAN, BANK MAY, IN ITS SOLE DISCRETION,
SPECIFY THE CONDITIONS APPLICABLE TO SUCH EXTENSION WHICH MAY INCLUDE, WITHOUT
LIMITATION, THE DELIVERY TO BANK OF SUCH DOCUMENTS, INSTRUMENTS AND ASSURANCES
AS BANK MAY DEEM NECESSARY OR APPROPRIATE TO EVIDENCE SUCH EXTENSION.
<PAGE>   17
PMC Capital, Inc.
May 15, 1996
Page 17




         If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.

                                         Very truly yours,                  
                                                                            
                                         BANK ONE, TEXAS, N.A.              
                                                                            
                                                                            
                                                                            
                                         By: \s\                       
                                            --------------------------------
                                            David L. Perdue                 
                                            Senior Vice President           
                                                                            
                                         Bank's Address:                    
                                         1717 Main Street, 3rd Floor        
                                         Dallas, Texas  75201               
                       

ACCEPTED as of the date first
written above.

BORROWER:                                       Borrower's Address:


PMC CAPITAL, INC.                               17290 Preston Road
                                                Dallas, Texas  75252


By: \s\                               
   --------------------------------
   Lance B. Rosemore
   President and CEO
<PAGE>   18
                                                                       EXHIBIT A

                              REQUEST FOR ADVANCE


         Reference is made to that certain Loan Agreement dated as of May 15,
1996 (as from time to time amended, the "Agreement"), by and between PMC
CAPITAL, INC. ("Borrower"), and BANK ONE, TEXAS, N.A. ("Bank").  Terms which
are defined in the Agreement are used herein with the meanings given them in
the Agreement.  Pursuant to the terms of the Agreement Borrower hereby requests
Bank to make an advance to Borrower in the principal amount of $__________
and specifies ____________, 19__, as the date Borrower desires for Bank to make
such advance and to deliver to Borrower the proceeds thereof.

         To induce Bank to make such advance Borrower hereby represents,
warrants, acknowledges, and agrees that:

                 (a)  The officer of Borrower signing this instrument is the
         duly elected, qualified and acting officer as indicated below such
         officer's signature hereto having all necessary authority to act for
         Borrower in making the request herein contained.

                 (b)  The representations and warranties of Borrower set forth
         in the Agreement and the other Loan Documents are true and correct on
         and as of the date hereof (except to the extent that the facts on
         which such representations and warranties are based have been changed
         by the extension of credit under the Agreement), with the same effect
         as though such representations and warranties had been made on and as
         of the date hereof.

                 (c)  There does not exist on the date hereof any condition or
         event which constitutes an Event of Default which has not been waived
         in writing of the Agreement; nor will any such Event of Default exist
         upon Borrower's receipt and application of the advance requested
         hereby.  Borrower will use the advance hereby requested for the
         funding of Commercial Loans.

                 (d)  Except to the extent waived in writing, Borrower has
         performed and complied with all agreements and conditions in the
         Agreement required to be performed or





                                      -1-
<PAGE>   19
         complied with by Borrower on or prior to the date hereof, and each of
         the conditions precedent to advances contained in the Agreement
         remains satisfied.

                 (e)  The Loan Documents have not been modified, amended or
         supplemented by any unwritten representations or promises or by any
         course of dealing.  The Agreement and the other Loan Documents are
         hereby ratified, approved, and confirmed in all respects.

         The officer signing this instrument hereby certifies that, to the best
of his knowledge after due inquiry, the above representations, warranties,
acknowledgements, and agreements of Borrower are true, correct and complete.

         IN WITNESS WHEREOF, this instrument is executed as of 
____________, 1996.

                                        PMC CAPITAL, INC.



                                        By:
                                           ---------------------------
                                           Name: 
                                           Title:





                                      -2-