EMPLOYMENT AGREEMENT

     This  EMPLOYMENT  AGREEMENT  (this  "Agreement")  is dated as of January 1,
2002,  between  Margaret Chance  ("Employee"),  Ameritrans  Capital  Corporation
("Ameritrans"),  and Elk Associates Funding Corporation  ("Elk")  (collectively,
Ameritrans and Elk are hereinafter referred to as the "Employer").

     In consideration  of the premises and the mutual covenants  hereinafter set
forth and other good and valuable consideration,  the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

1.   Employment of Employee.

     Employer hereby agrees to employ Employee, and Employee hereby agrees to be
and remain in the employ of Employer,  upon the terms and conditions hereinafter
set forth.

2.   Employment Period.

     Subject to the  earlier  termination  as provided in Section 5, the term of
Employee's  employment  under this  Agreement  shall  commence as of the date of
execution (the  "Effective  Date"),  and shall continue for a period of five (5)
years  (the  "Initial  Employment  Period").  Unless  Employer  gives  notice of
non-renewal  at least four (4) months  prior to the  expiration  of the  Initial
Employment  Period or  Employee  gives  notice of  non-renewal  at least two (2)
months prior to the  expiration of the Initial  Employment  Period,  the term of
this Agreement  shall be extended for an additional  five (5) year period beyond
the end of the Initial  Employment  Period on the same terms and  conditions  in
effect under this  Agreement at the time of  extension  (the Initial  Employment
Period and any  extension  thereof is hereafter  referred to as the  "Employment
Period").  During the period between the fourth month and the second month prior
to the expiration of the Initial Employment Period,  Employer and Employee shall
negotiate  in good faith with  respect to any  additional  terms to the  renewed
Employment Agreement.

3.   Duties and Responsibilities.

     3.1. General.  During the Employment Period,  Employee shall have the title
of  Vice  President  and  Secretary  of  the  Employer  and  shall  have  duties
commensurate  with her office and title.  Employee shall report  directly to and
take  direction  from Gary Granoff.  Employee  shall devote such of her business
time, consistent with past practice, and expend her best efforts,  energies, and
skills to the Employer.

4.   Compensation and Related Matters.

     4.1.  Base  Salary.  For  each  of  the  twelve-month  periods  during  the
Employment  Period,  commencing with the  twelve-month  period  beginning on the
Effective Date (each such period, an "Employment  Year"),  Employer shall pay to
Employee a base salary  equal to $75,000 for the first  Employment  Year,  which
shall increase by 4% for each  subsequent  Employment Year (with respect to each
Employment  Year, the "Base  Salary").  The Base Salary for each Employment Year
shall be payable in accordance with the normal payroll procedures of Employer.

     4.2. Annual Bonus. For each fiscal year during the Employment Period (each,
a "Bonus  Year"),  Employee  shall be  eligible  to receive a bonus based on the
achievement of corporate  and/or  individual  performance  objectives set by the
Board for such Bonus Year at the discretion of the Board (a "Bonus"), such Bonus
not to be less than $8,500. Any Bonus earned for any Bonus Year shall be payable
promptly following the determination thereof, but in no event later than 45 days
after the end of such year.

<PAGE>


     4.3. Other Benefits.  During the Employment Period,  subject to, and to the
extent  Employee is eligible  under their  respective  terms,  Employee shall be
entitled to receive  such  benefits as are, or are from time to time  hereafter,
generally  provided  by  Employer  to  Employer's  senior  management  employees
(including any executive vice president or chief financial  officer) (other than
those provided under or pursuant to separately  negotiated individual employment
agreements or  arrangements)  under any pension or retirement  plan (which as of
the date  hereof is  Employer's  existing  SEP IRA plan),  disability  plan,  or
insurance, group life insurance, family medical and dental insurance, accidental
death and dismemberment  insurance,  travel accident insurance, or other similar
plan or program of  Employer.  In the event of temporary  illness or  short-term
disability, Employer shall make reasonable accommodation for Employee to perform
her duties from home or other location at which Employee resides.

     4.4.  Expense  Reimbursement.  Employer  shall  reimburse  Employee for all
business  expenses  reasonably  incurred by her in the performance of her duties
under this Agreement upon her  presentation  of signed and itemized  accounts of
such expenditures,  all in accordance with Employer's procedures and policies as
adopted and in effect from time to time and applicable to its senior  management
employees. Included in Employee's reimbursement shall be the Employee's home DSL
line.

     4.5.  Vacations.  Employee  shall be entitled to thirty (30)  business days
vacation for each calendar year during the Employment  Period,  which  vacations
shall be taken at such time or times as shall not  unreasonably  interfere  with
Employee's  performance  of her duties under this  Agreement.  Employee shall be
entitled to an additional five (5) personal days.

     4.6. Stock Options.  In order to provide further  incentive to Employee and
align the  interests  of Employee  with those of the  stockholders  of Employer,
Employer shall grant to Employee,  from time to time, options to purchase shares
of common stock of Employer,  par value per share $.01 (the "Common Stock"),  in
an amount  determined by the Company's board of directors or committee  thereof,
as the case may be. The  options  shall be granted  pursuant  to the  Employer's
existing Stock Option Plan consistent with the terms and conditions therein. The
options  shall  have such  other  terms and  conditions  as set forth in a stock
option  agreement.  Employer  shall  register  the sale of any  Common  Stock to
Employee  upon the  exercise  of any such  options  pursuant  to a  Registration
Statement on Form S-8, provided that Form S-8 is available to Employer under the
Securities  Act of 1933 and the  rules and  regulations  of the  Securities  and
Exchange Commission at the time Employee exercises such options.

5.   Termination of Employment Period.

     5.1. Voluntary Termination by Employee. Employee may, by notice to Employer
at any time during the Employment  Period,  voluntarily resign from Employer and
terminate the  Employment  Period.  The effective  date of such  termination  of
Employee from Employer  shall be the date that is thirty (30) days following the
date on which such notice is given.

     5.2. By Employer for Cause. Employer may, at any time during the Employment
Period,  by notice to Employee,  terminate the Employment Period for "Cause." As
used herein,  "Cause" shall mean (i) incompetence,  fraud,  personal dishonesty,
defalcation,  or acts of gross  negligence  or gross  misconduct  on the part of
Employee in the course of her  employment,  (ii) an  intentional  breach of this
Agreement  by Employee  that is injurious to  Employer,  (iii)  substantial  and
continued  failure by  Employee to perform her duties  hereunder,  (iv)  willful
failure  by  Employee  to follow the lawful  directions  of Gary  Granoff or the
Board,  (v) use of alcohol by Employee  or her  illegal use of drugs  (including
narcotics)  which in either  case is, or could  reasonably  expected  to become,
materially injurious to the reputation or business of Employer or which impairs,
or could reasonably be expected to impair,  the performance of Employee's duties
hereunder,  (vi) Employee's conviction by a court of competent  jurisdiction of,
or pleading "guilty" or "no


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<PAGE>

contest" to, (x) a felony,  or (y) any other  criminal  charge (other than minor
traffic violations) which has or could reasonably be expected to have a material
adverse impact on Employer's reputation and standing in the community,  or (vii)
Employee's  violation of any of the  provisions of Section 7 herein.  Any notice
given by Employer  pursuant to Section  5.2(ii),  (iii), or (iv),  above,  shall
specify in  writing in  reasonable  detail  the nature of  Employee's  action or
inaction that is the cause for giving such notice. Employee will have 30 days to
cure, to the reasonable satisfaction of Employer, any action or inaction charged
by Employer  for Cause  under (ii),  (iii),  or (iv),  above.  In the event of a
termination of the  Employment  Period for Cause under (i), (v), (vi), or (vii),
above, the Employment Period shall terminate immediately upon notice by Employer
of termination  for Cause. In all other cases of a termination of the Employment
Period for Cause,  the  Employment  Period  shall  terminate  30 days after such
notice of termination for Cause,  unless Employee has satisfactorily  cured such
actions or inactions.

     5.3. By Employee for Good Reason.

     (a)  Employee  may, at any time during the  Employment  Period by notice to
Employer, terminate the Employment Period under this Agreement for "Good Reason"
(as defined below).  For the purposes hereof,  Employee shall have "Good Reason"
to terminate  employment with Employer on account of any of the following events
without Employee's consent:  (i) any reduction in the Base Salary; (ii) Employer
relocating  its  principal  headquarters  outside  of  a  10  mile  radius  from
Manhattan; (iii) the failure of Employer to provide employee benefits consistent
with  Section 4.3  herein,  or (iv) a "Change in  Control"  (as defined  below);
provided,  however,  that the  circumstances set forth in this Section 5.3 shall
not be Good Reason if within 30 days of notice by Employee to Employer, Employer
cures such  circumstances.  The effective  date of such  termination of Employee
from Employer  shall be the date that is thirty (30) days  following the date on
which such notice is given.

     (b) For purposes of this Section 5.3, a "Change in Control" shall be deemed
to have taken place if any "Person" (as such term is defined in Section  3(a)(9)
of the  Securities  Exchange  Act of 1934  (the  "Exchange  Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),  directly or  indirectly,  of
securities of the  Corporation  representing  50% or more of the combined voting
power  of  Employer's  then  outstanding  securities  eligible  to vote  for the
election of the Board (the "Voting  Securities");  provided,  however,  that the
event  described  in this  paragraph  (b)  shall not be deemed to be a Change in
Control by virtue of any of the following  acquisitions:  (i) by Employer or any
subsidiary  of Employer  in which  Employer  owns more than 50% of the  combined
voting power of such entity (a "Subsidiary"),  (ii) by any employee benefit plan
(or related trust) sponsored or maintained by Employer or any Subsidiary,  (iii)
by any underwriter  temporarily holding Employer's Voting Securities pursuant to
an offering of such Voting  Securities,  or (iv) pursuant to any  acquisition by
Employee or any group or persons including Employee (or any entity controlled by
Employee or any group of persons including Employee).

     5.4. Disability.  During the Employment Period, if, as a result of physical
or mental  incapacity  or  infirmity,  Employee  shall be unable to perform  her
duties under this Agreement for (i) a continuous period of at least 120 days, or
(ii) periods  aggregating  at least 180 days during any period of 12 consecutive
months (each, a "Disability  Period"),  and at the end of the Disability  Period
there is no reasonable  probability that Employee can promptly resume her duties
hereunder, Employee shall be deemed disabled (the "Disability") and Employer, by
notice to Employee,  shall have the right to terminate the Employment Period for
Disability at, as of, or after the end of the Disability  Period.  The existence
of the  Disability  shall  be  determined  by a  reputable,  licensed  physician
selected  by  Employer in good  faith,  whose  determination  shall be final and
binding on the  parties;  provided,  however,  Employee  shall have the right to
select a licensed  physician to render a second  opinion as to the  existence of
the Disability.  In the event the two physicians  have different  opinions as to
the existence of the  Disability,  the Employer  shall  promptly  cause its then
current healthcare


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<PAGE>

provider to appoint a physician  to render an opinion,  which  opinion  shall be
final and binding on the parties.  Employee  shall  cooperate in all  reasonable
respects to enable an examination to be made by such physician.  Notwithstanding
the foregoing,  Employer may conclusively  determine Employee to be disabled and
terminate  the  Employment  Period on  account of  Disability  at any time after
Employee has commenced receiving benefits under Employer's  long-term disability
insurance policy.

     5.5.  Death.  The  Employment  Period  shall end on the date of  Employee's
death.

     5.6.  Any  termination  under  this  Section  5 shall  act as a  notice  of
non-renewal of this Agreement pursuant to Section 2 herein.

6.   Termination Compensation.

     6.1.  Termination for Good Reason by Employee.  If the Employment Period is
terminated  by Employee for Good Reason  pursuant to the  provisions  of Section
5.3,  hereof,  Employer will pay to Employee  Employee's Base Salary through the
date of termination and an amount equal to the sum of the Base Salary multiplied
by the  number of years  (and  fractional  portions  thereof)  remaining  in the
Employment  Period (the "Severance  Payment");  provided,  however,  the minimum
Severance  Payment to be paid to  Employee  hereunder  shall not be less than an
amount equal to two-and-one-half years of Employee's Base Salary as in effect at
the time this Agreement is terminated as provided herein. Employer shall have no
obligation  to continue  any other  benefits  provided for in Section 4 past the
date of termination.

     6.2. Certain Other Terminations.  If the Employment Period is terminated by
Employer  for Cause or on  account  of  Employee's  Disability  pursuant  to the
provisions  of Sections 5.2 or 5.4, or by death,  pursuant to the  provisions of
Section 5.5, Employer shall pay to Employee, within thirty (30) calendar days of
the date of termination,  Employee's Base Salary through the date of termination
and a pro-rated share of the discretionary bonus if already  determined.  In the
event  that the  Employment  Period is  terminated  by  Employer  on  account of
Disability  pursuant  to the  provisions  of Section  5.4 or on account of death
pursuant  to the  provisions  of  Section  5.5 and  provided  Employee  has been
employed for at least six months during the year of termination,  Employer shall
also pay to Employee a portion of a bonus for the year of termination based upon
the bonus paid, if any, for the immediately  preceding year prorated through the
date of  termination.  Employer  shall have no  obligation to continue any other
benefits provided for in Section 4 past the date of termination.

     6.3. Payment;  No Other Termination  Compensation.  Any payment pursuant to
this  Section  6 shall  be made in a lump sum  within  ten  (10)  business  days
following the date of such termination.  Employee shall not, except as set forth
in this Section 6, be entitled to any compensation  following termination of the
Employment Period.

7.   Non-Competition, Non-Solicitation.

     7.1.  Non-solicitation  of Employees.  The Employee  agrees that during the
term of the Employee's employment with the Employer and for a period of one year
thereafter, the Employee shall not directly recruit, solicit or otherwise induce
or attempt to induce any  employees of the Employer to leave the  employment  of
the Employer.

     7.2.  Non-competition.  The  Employee  agrees  that  during the term of the
Employee's  employment  with the  Employer,  the Employee  shall not directly or
indirectly,  except as a passive  investor in publicly held companies and except
for investments held at the date hereof, engage in competition with the Employer
or any of its subsidiaries,  excluding those activities described in Section 3.1
hereof, or own


                                      -4-
<PAGE>

or control any  interest  in, or act as  director,  officer or  employee  of, or
consultant  to,  any  firm,  corporation  or  institution  directly  engaged  in
competition with the Employer or any of its subsidiaries.

8.   Successors; Binding Agreement.

     This  Agreement  and all rights of  Employee  hereunder  shall inure to the
benefit of and be  enforceable  by  Employee  and  Employee's  personal or legal
representatives,  executors,  administrators,  successors,  heirs, distributees,
divisees,  and legatees. If Employee should die while any amounts would still be
payable to her hereunder if she had continued to live, all such amounts,  unless
otherwise  provided  herein,  shall be paid in accordance with the terms of this
Agreement to Employee's  devisee,  legatee, or other beneficiary or, if there be
no such beneficiary, to Employee's estate.

9.   Survivorship.

     The  respective  rights and  obligations  of the  parties  hereunder  shall
survive  any  termination  of this  Agreement  to the  extent  necessary  to the
intended preservation of such rights and obligations.

10.  Miscellaneous.

     10.1. Notices. Any notice,  consent, or authorization required or permitted
to be given pursuant to this Agreement shall be in writing and sent to the party
for or to whom  intended,  at the  address  of such  party set forth  below,  by
registered or certified mail, postage paid (deemed given five days after deposit
in the U.S.  mails) or  personally  delivered or sent by facsimile  transmission
(deemed  given upon  receipt),  or at such other  address as either  party shall
designate by notice given to the other in the manner provided herein.

          If to Employer:   Ameritrans Capital Corporation
                            747 Third Avenue, 4th Floor
                            New York, New York 10017
                            Attn: Gary Granoff, President

          If to Employee:   Ms. Margaret Chance
                            6154 Gates Avenue
                            Ridgewood, New York 11385

     10.2.  Taxes.  Employer is authorized to withhold (from any compensation or
benefits  payable  hereunder  to Employee)  such amounts for income tax,  social
security,  unemployment  compensation,  and other taxes as shall be necessary or
appropriate  in the  reasonable  judgment of Employer to comply with  applicable
laws and regulations.

     10.3.  Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without reference
to the principles of conflicts of laws therein.

     10.4.  Arbitration.   Any  dispute  or  controversy  arising  under  or  in
connection  with this Agreement  shall be settled  exclusively by arbitration in
the city in which  Employer's  main  corporate  headquarters  is then located in
accordance  with  the  rules of the  American  Arbitration  Association  then in
effect.  Judgment  may be entered on the  arbitration  award in any court having
jurisdiction.

     10.5. Headings. All descriptive headings in this Agreement are inserted for
convenience  only,  and shall be  disregarded  in  construing  or  applying  any
provision of this Agreement.


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<PAGE>

     10.6. Counterparts. This Agreement may be executed in counterparts, each of
which  shall be deemed to be an  original,  but all of  which,  together,  shall
constitute one and the same instrument.

     10.7.  Severability.  If any  provision  of  this  Agreement,  or any  part
thereof,  is held to be unenforceable,  the remainder of such provision and this
Agreement,  as the case may be,  shall  nevertheless  remain  in full  force and
effect.

     10.8.  Entire  Agreement and  Representation.  This Agreement  contains the
entire agreement and understanding between Employer and Employee with respect to
the subject  matter  hereof.  No  representations  or  warranties of any kind or
nature relating to Employer or its several businesses, or relating to Employer's
assets, liabilities, operations, future plans, or prospects have been made by or
on behalf of Employer to Employee. This Agreement supersedes any prior agreement
between the parties relating to the subject matter hereof.

     10.9.  Validity.  The  invalidity or  unenforceability  of any provision or
provisions of this Agreement shall not affect the validity or  enforceability of
any other provision or provisions of this Agreement,  which shall remain in full
force and effect.  If any  provision  of this  Agreement  is held to be invalid,
void, or unenforceable in any  jurisdiction,  any court or arbitrator so holding
shall substitute a valid,  enforceable provision that preserves,  to the maximum
lawful extent, the terms and intent of such provisions of this Agreement. If any
of the  provisions  of, or covenants  contained in, this Agreement are hereafter
construed to be invalid or unenforceable in any jurisdiction, the same shall not
affect the  remainder of the  provisions  or the  enforceability  thereof in any
other jurisdiction,  which shall be given full force and effect,  without regard
to the  invalidity  or  unenforceability  in such other  jurisdiction.  Any such
holding  shall  affect  such  provision  of this  Agreement,  solely  as to that
jurisdiction,  without  rendering that or any other provisions of this Agreement
invalid,  illegal, or unenforceable in any other  jurisdiction.  If any covenant
should  be  deemed  invalid,  illegal,  or  unenforceable  because  its scope is
considered  excessive,  such  covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent  necessary to render the modified
covenant valid, legal, and enforceable.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                      AMERITRANS CAPITAL CORPORATION


                                      By: /s/ Gary Granoff
                                          -------------------------------------
                                          Gary Granoff


                                      ELK ASSOCIATES FUNDING CORPORATION


                                      By: /s/ Gary Granoff
                                          -------------------------------------
                                          Gary Granoff


                                          /s/ Margaret Chance
                                          -------------------------------------
                                          Margaret Chance


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