Something to Bank On Community banks have plenty of money to lend, but intense scrutiny has raised the bar.

If lenders are giving business borrowers the cold shoulder, Renee Wood, founder of The Comfort Company, hasn't felt the chill. When Wood, 43, needed a loan to purchase a new $180,000 warehouse for her growing business, an online boutique that specializes in sympathy and memorial gifts, all she had to do was walk into her local bank and ask for one. After showing solid financials, not only was her loan approved, but also the bank suggested a $50,000 line of credit. It didn't hurt that Wood had banked with Harris Bank for 10 years and also holds her commercial accounts there. "They know my business, and they know me," she says. "They could just look at the business checking account and see the growth trends." Her Geneva, Illinois, business projects sales of about $820,000 this year.

For businesses with strong financials, the community best banks have plenty of money to lend--and they are aggressively courting small businesses. But thanks to increased regulatory scrutiny, all banks--even those that had no part in the subprime mortgage mess--are being forced to tighten their lending standards and are therefore narrowing the range of acceptable borrowers, says Paul Merski, chief economist and director of federal tax policy for Independent Community Bankers of America. "That's going to make it a little more difficult for entrepreneurs to get the capital they need," he says. The housing market slump hasn't helped either, since roughly half of all loans made in the small-business arena are collateralized by some kind of personal or commercial real estate; as the value of that real estate declines, the amount that borrowers qualify for shrinks as well. Because of that and the continuing economic downturn, businesses that seemed like a good risk last year might have more trouble proving their creditworthiness today.

That's why community bankers are clamoring for more support for the SBA's government-guaranteed loan program, which gives lenders more leeway with credit terms. "It's a tool to be able to give your customer access to capital under extended terms that fit their business model," says Cynthia L. Blankenship, chair of ICBA. For example, regulators don't like banks to extend their terms on conventional loans to accommodate small-business cash-flow issues, but SBA loans can go much further out--for as many as 25 years.