By DAVID BERTOLA
dbertola@bizjournals.com | 716-541-1621

The president of Atlas Painting and Sheeting Corp., James Frangos, said that in the last 25 years, his company avoided U.S. Small Business Administration-backed loans.

"In the past, the SBA always had high fees attached to them. So we mostly stayed away," he said.

But with the fees waived - and a 90 percent guarantee - such loans became more attractive to the industrial and commercial painting business.

It also resulted in a significant increase of 7(a) loans approved by Evans Bank, which approved a line of credit and another loan for Atlas. In the SBA's 2010 fiscal year, which ended Sept. 30, Evans Bank approved 42 SBA 7(a) loans totaling $8.9 million - an increase from 16 loans totaling $1.8 million the previous year.

The 7(a) loan program is the SBA's primary one for assisting startup and existing small businesses.

Evans Bank officials said they didn't market the bank or the loans any differently than before.

"We just looked to the fact that a company may have a down quarter, and SBA offered assurance to get the deal done," said Vince Cutrona, commercial loan officer.

"A $1 million loan could have $30,000 in fees, which is tough to swallow," he said. "Eliminating those fees, we are able to take advantage of financing during tough recessionary times."

7(a) loan approvals up from
previous fiscal year

Reduction or elimination of loan fees plus an increase to 90 percent on loan guarantees were among special provisions of the American Recovery and Reinvestment Act, which President Barack Obama signed into law Feb. 17, 2009.

"I think this is a perfect example of what the American Recovery and Reinvestment Act was all about:, to stimulate banks to lend to small business," said Frank Sciortino, director of the SBA's Buffalo District office.

He praised the region's community banks and rural banks, many of which he met with over the last year to explain details of the fee waiver and loan guarantees.

He also pointed to M&T Bank, which for the 16th straight year ranked as the top local lender for 7(a) loans. It approved 127 7(a) loans totaling $20.7 million. First Niagara was second at 58 loans totaling $9.6 million.

Overall, 7(a) loan approvals for the Buffalo District increased from 351 loans totaling $38.5 million in fiscal year 2009 to 393 totaling $61.3 million in fiscal 2010.

SBA: Recovery Act
stimulated banks to lend

Sciortino described Evans Bank, meanwhile, as "a very progressive bank that said, ‘We can get a 90 percent guarantee now and not charge a fee to borrowers.' They had a substantial increase, and it's because of the recovery act, which is doing what it was supposed to do: stimulate banks to lend."

Cutrona agreed that the American Recovery and Reinvestment Act helped Evans Bank illustrate to small businesses how an SBA-backed loan can help.

"With the no fees last year, there was no reason to not do an SBA loan," he said, adding that there is a stigma that the process is too long and the fees expensive.

"It was worth the wait," Frangos said.

Atlas was approved by Evans Bank for a $350,000 credit line, to which $500,000 was added. In addition, the bank approved Atlas for a $1.55 million loan, which Frangos said helped Atlas re-construct current and long-term debt into a 10-year payout.

"It's been a good thing for us, as it freed up some cash flow," said Frangos.

His company, which primarily is contracted to paint bridges, hired 20 workers for projects. Business is strong this year, he said, with 2010 sales expected to be more than $15 million. That's up from $10 million in 2009.

Frangos said he's not sure what 2011 will bring, but the company bid on projects all over the Northeast.

The loan, he said, should help his operation.

"While we are in a better strength position, there are no guarantees," he said. "If we didn't have this influx, we couldn't think of moving forward."3