UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  SCHEDULE 13G

                  Under the Securities and Exchange Act of 1934





                        Litchfield Financial Corporation
                                (Name of Issuer)

                          Common Stock, $.01 par value
                         (Title of Class of Securities)

                                    536619109
                                 (CUSIP Number)

Check the following box if a fee is being paid with this  statement  |_|. (A fee
is not required only if the filing person:  (1) has a previous statement on file
reporting  beneficial  ownership  of more  than  five  percent  of the  class of
securities  described  in Item 1;  and (2) has  filed  no  amendment  subsequent
thereto  reporting  beneficial  ownership  of  five  percent  of or less of such
class.) (See Rule 13-d-7).

*The  remainder of this cover page shall be filled out for a reporting  person's
initial filing on this form with respect to the subject class of securities, and
for any  subsequent  amendment  containing  information  which  would  alter the
disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the  Securities  and Exchange Act
of 1934 ("Act") or otherwise  subject to the  liabilities of that section of the
Act but shall be subject to all other  provisions of the Act  (however,  see the
Notes).



                                                               Page 2 of 6 Pages



1             NAME OF REPORTING PERSON
              S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

              Donald R. Dion, Jr.
              ###-##-####

2             CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP           (a) |_|
                                                                   N/A   (b) |_|
3             SEC USE ONLY


4             CITIZENSHIP OR PLACE OF ORGANIZATION

              United States

Number        5          SOLE VOTING POWER
of shares
benefic-                 308,399
ially
owned by      6          SHARED VOTING POWER
each
reporting                N/A
person
with          7          SOLE DISPOSITIVE POWER

                         308,399
    
              8          SHARED DISPOSITIVE POWER

                         N/A

9             AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

              308,399

10            CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN 
              SHARES

              N/A

11            PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9

              7.1%

12            TYPE OF REPORTING PERSON

              IN



                                                               Page 3 of 6 Pages



Item 1(a)         Name of Issuer:

                  Litchfield Financial Corporation

Item 1(b)         Address of Issuer's principal executive offices:

                  789 Main Road
                  Stamford, VT 05352

Item 2(a)         Name of person filing:

                  Donald R. Dion, Jr.

Item 2(b)         Address of principal business office or, if none, residence:

                  c/o Dion Money Management
                  279 Main Street
                  Williamstown, MA 01267

Item 2(c)         Citizenship:

                  United States

Item 2(d)         Title of class of securities:

                  Common Stock, $.01 par value

Item 2(e)         CUSIP Number:

                  536619109

Item 3            If Statement filed pursuant to Rule 13d-1(b) or 13d-2(b), 
                  check whether the person filing is a:

                  (a)      |_| Broker or Dealer

                  (b)      |_| Bank

                  (c)      |_| Insurance Company

                  (d)      |_| Investment Company

                  (e)      |_| Investment Advisor

                  (f)      |_| Employee Benefit Plan, Pension Fund or Endowment
                               Fund






                                                               Page 4 of 6 Pages



                  (g)      |_| Parent Holding Company

                  (h)      |_| Group

Item 4            Ownership:

                  (a)      Amounts beneficially owned:        308,399


                  (b)      Percent of class:         7.1%


                  (c)      Number of shares as to which such person has:

                        (i)   sole power to vote or to direct the vote:  308,399

                       (ii)   shared power to vote or to direct the vote: N/A

                      (iii)   sole power to dispose or to direct the disposition
                              of: 308,399

                       (iv)   shared power to dispose or to direct the 
                              disposition of: N/A

Item 5            Ownership of 5% or Less of a Class:

                  Not applicable.

Item 6            Ownership of more than 5% on behalf of another person:

                  Not applicable.

Item 7            Identification and classification of the subsidiary which 
                  acquired the security being reported on by the Parent Holding 
                  Company:

                  Not applicable.

Item 8            Identification and classification of members of the Group:

                  Not applicable.

Item 9            Notice of Dissolution of Group:

                  Not applicable.

Item 10           Certification:

                  Not applicable.





                                                               Page 5 of 6 Pages


                                    SIGNATURE


         After reasonable  inquiry and to the best of my knowledge and belief, I
certify that the information  set forth in this statement is true,  complete and
correct.




Dated:  2/13/97                                  /s/ Donald R. Dion, Jr.
                                                     Donald R. Dion, Jr.





147590-1