BANKS LESS WILLING TO LOAN TO SMALL FIRMS.

Byline: Evan Pondel Staff Writer

Lenders are sizing up small businesses with greater scrutiny as a finicky economy makes securing a loan more difficult.

``We are starting to see banks tightening credit. Businesses are finding it difficult to receive money and banks are reluctant to make loans to start-ups,'' said Roberto Barragan, president of the Valley Economic Development Center.

The National Federation of Independent Businesses estimates 57 percent of lenders will tighten credit to small businesses in the next six months.

In 2001, the Small Business Administration provided 48,170 loans nationally compared with 48,313 loans in 2000 and 48,919 in 1999.

Bob Borden, a spokesman for the SBA, said the decline is directly related to the slumping economy. ``In 1999, the economy was really buzzing, and it continued fairly strong for a little while, but then, when you compare spring of 2000 with 2001 you see a drop following the economic downturn,'' he said.

Among the reasons posed for the dropoff in SBA loans: a wavering economy making lenders less inclined to cut loans to small businesses.

But Bob Dalrymple, senior vice president and manager of United California Bank's small business unit, said his company's strategy is less about being frugal and more about being selective.

``I wouldn't say we're tightening credit, but we're becoming more vigilant, looking at loan applications very closely,'' he said.

For example, a technology company that has recently submitted an application for a loan today versus two years ago may be subject to a thorough check of its financial viability.

``We're going to look at the business or industry, the customer's history, to be sure we're comfortable,'' he said. ``And we're going to be very cautious on some of the high-tech stuff just because we've seen some deteriorating trends in that market.''

Still, those trends haven't changed other banks' philosophies on small business loans. Union Bank of California has maintained the same lending program for several years because the formula simply works for the institution.

``We have made no changes at all to our lending program - it's still a one-page application that is credit-scored for loans up to $100,000,'' said Beth Raphael, senior vice president that manages the business credit center for the bank.

While some banks travel out of their territories for small business loans, Raphael said Union Bank only focuses on business that are in close proximity with its branches.

``Loans are down just slightly for the third quarter, compared with last year,'' Raphael said. ``We haven't seem a major decline because we aren't branched out to areas where we don't have a banking presence.''