Small business borrowers get creative

Greenfield Collision owner Don Lane (at right) switched banks to get an SBA-backed loan.

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Where the ARC loans are

The government's America's Recovery Capital (ARC) loan program aims to help struggling small businesses. Here's a look at which banks are making the loans. View Map

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Startup stories: 'How we got the cash'

Small businesses are struggling to find banks willing to lend. Here's how - and where - 6 entrepreneurs got the loans and credit lines they need.

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(Fortune Small Business) -- When the borrowing gets tough, the tough keep trying.

Lenders turned down initial applications from all four of these small businesses, but their intrepid owners refused to take no for an answer. Their patience paid off, literally. Here's where they struck gold:

Sharon and Mike Bigler
Co-owners, Cavalry Electric Company
Electrical contractor in Odessa, Fla.
Annual revenues: $2 million
Employees: 19

The Biglers consolidated $57,000 in vehicle loans and refinanced a $200,000+ mortgage through Grow Financial Federal Credit Union, Tampa.

Credit unions expanded their business lending by 18% in 2008 and expect a 13.8% jump in 2009. When Grow restructured Cavalry's mortgage and combined six vehicle loans into one, the company's monthly costs dropped $4,000.

Don Lane
Owner, Greenfield Collision
Auto repair in Detroit and Washington, Mich.
Annual revenues: $4 million
Employees: 11

Lane borrowed $463,500 from Citizens First Bancorp, Port Huron, Mich.

In March the Small Business Administration suspended borrowing fees on loans and raised its guarantee from between 75% and 85% to 90%. This spurred some additional SBA lending, often through smaller banks.

When Lane asked his longtime bank, Fifth Third Bank, for a loan to buy the building he'd been leasing for 11 years, he says he was told there was no way it could happen, despite his high credit score and solid business track record. At Citizens First, another small bank, the loan officer suggested he try for a loan under the new SBA rules.

"To get the SBA loan took two weeks and it was done," says Lane, 46. "Wow! You can't get a mortgage that quick." The fee cut saved him $12,000.

Charles Cason
Owner, CEC Services
Construction site security in Portland, Ore.
Annual revenues: $250,000
Employees: 25 (part-time)

Cason borrowed $6,000 from the Oregon Association of Minority Entrepreneurs.

This year's American Recovery and Reinvestment Act added support for an extra $50 million in loans to the SBA's $21.4 million microloan program (for loans up to $35,000), as well as $24 million in technical assistance for these loans.

Cason, a Vietnam vet with negative marks on his credit report, exhausted himself applying for bank loans before getting his microloan, which he needed to make payroll. "It's been crazy out here," he says. "Small businesses have nobody to go to. If you don't have a line of credit, what do you do?"

David Morris
Owner, Jimmyjacks
Hot dog and burger restaurant in Bellmore, N.Y.
$110,000 startup investment
Morris borrowed $20,000 through Lending Club, based in Sunnyvale, Calif.

When Morris and his brother decided to trade Wall Street for a restaurant, they figured that two employed men with six-figure salaries and good credit could easily get a $20,000 loan to top off the $90,000 they already had. After 25 banks turned them down, they tried Lending Club, a peer-to-peer site that matches investors with promising ventures and individuals that need capital.

Small business lending has accelerated on the site in the past year. In the first six months of 2009, Lending Club issued $4.1 million in small business loans, more than three times the amount issued during the same period in 2008. The rates at peer-to-peer lending sites, including Lending Club, Prosper and Pertuity Direct, tend to be competitive with those of bank loans and lower than rates charged by credit-card companies.