Bankers have long complained about the Small Business Administration, griping about paperwork and lamenting long waits for approvals.

But faced with an onslaught of competition, bankers have begun to reconsider their views about SBA loans. With nonbank lenders such as the Money Store increasing SBA lending tenfold in the last decade, banks have begun to feel that it's better to shut up and make the loans than to whine about them.

"Small businesses that will grow and create jobs need capital," said Alan Lipsky, first senior vice president for New Jersey's Valley National Bank, "and the best alternative to capital is a long-term SBA loan."

Banks-including Cleveland-based KeyCorp, Alabama's Compass Bancshares, New Jersey's Summit Bancorp, and Triangle Bank in Raleigh, N.C.-are expanding their SBA lending divisions.

For lenders, the chief attractions of SBA loans are the federal government guarantee and the ability to sell the standardized loans on the secondary market. For borrowers, the agency offers 25-year loans at fixed interest rates, which can be especially useful for real estate or business acquisitions.

Last year, the SBA made its loans more palatable with a one-page application form for loans of less than $100,000, and it can now make decisions on some loans in two days. The agency is centralizing some loan servicing and improving procedures for liquidating loans.

"There were stories that it took forever to get a loan approved and the paperwork was three inches thick, but that isn't true anymore," said Jane Palsgrove Butler, the agency's acting associate administrator.

Of course, that doesn't mean the SBA is problem-free. Last winter, the month-long federal government shutdown crimped loan approvals, and the year before that a cap imposed by Congress limited the size of SBA loans to $500,000 for a time.

With the loan cap now $1 million, the SBA last year raised the fees it charges from 2% of a loan's value to a sliding scale that goes up to 3.9% for the portion of the loan above $500,000. Politicians also periodically threaten to scrap the SBA or merge its loan programs into other federal agencies.

Even John Konevich, senior vice president and national sales manager for the Money Store Investment Corp., said selling SBA loans takes more work because borrowers still have a negative perception of the federal agency and dislike the paperwork involved.

While the SBA requires certain forms for loan applications, the Money Store gives borrowers user-friendly applications with larger type, simplified language, and more colorful printing. Borrowers complete the Money Store applications and return them to the lending officers, who fill in the SBA form and ask the borrower to sign it before the loan request is submitted to the agency.

Although bankers haven't universally embraced the SBA, they increasingly view its government-guaranteed loans as an essential part of the product mix needed to expand their small-business lending divisions.

"The SBA financing might be one component of our relationship with a small business because we could also set up a 401(k) plan or a deposit account or have a personal relationship with the business owner," said Jayne Crosby Giles, KeyCorp senior vice president for SBA lending.

Ms. Butler, the SBA official, said lenders who want to be successful must become familiar with agency procedures, design a cohesive plan for their SBA lending, and market their loan programs to potential borrowers.

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