It may not be Ronald Reagan's federalism, but a small business loan program offered by Oregon has bankers saying it is easier to use and better than those offered by the U.S. Small Business Administration.

Copied from a program in Michigan, Oregon's Capital Access Program was designed to provide loan portfolio insurance to banks willing to lend to small businesses located in the state. Four years after its implementation, the program is winning praise from lenders for its flexibility and simplicity.

"If we focus on loans on receivables or operating assets, we would use the (Capital Access Program)," said Rhonda Wills, a senior vice president with Bank of Astoria, a $60 million-asset bank on Oregon's northwest coast.

Despite its size, Bank of Astoria has tapped the program 113 times since its inception in 1991 for loans worth over $3.9 million. This placed the bank first in terms of the dollar value of loans supported by the program, and third in terms of the number of loans supported. Only Key Bank, with 129 loans, and Portland-based U.S. Bank, with 118 loans, have made more loans under the program.

According to Mark Huston, manager of business finance at the Oregon Economic Development Department, the program has supported more than $18.6 million in loans since its formation, of which nearly $4.4 million has come during the past year.

The program is funded by a combination of fees paid by borrowers and contributions from the state. Borrowers pay a fee - ranging from 4% to 7% of the loan value - into a loan loss reserve fund established by every bank using the program. So far, default claims have totaled only $300,000, but officials expect that to rise as the program matures.

The state matches the fee paid by the borrower, in effect doubling or tripling the reserves set aside against the loan. The Oregon lottery is the source of the state's matching fees.

For frequent users of the program, these reserves can begin to accumulate over time. Key Bank of Oregon, for instance, has lent nearly $3.9 million under the program over the past two years. Key Bank has set aside nearly $250,000 in its loan loss reserve for the progran, including state contributions.

So far, the Keycorp subsidiary has not had to draw upon this reserve, said Trudy O'Donnell, a vice president who manages the small business lending group. The bank has not incurred any losses on loans made under the program.

Nonetheless, Ms. O'Donnell admits the program is used for loans that may not otherwise get approval. In particular, she said, the bank uses the program to make revolving lines of credit available to new companies, including start-ups.

"We have used the program very actively with new businesses - those that have been in existence for just a few years - and when there is some weakness in the credit," she said.

In fact, nearly 34% of all loans made under the program have gone to start-up companies, said Mr. Huston. The 602 loans made under the program are estimated to have created 1,000 jobs statewide.

Another inducement for lenders is the application process. The bank can use its own application forms and credit standards. And the only form required by the state is a one-page, nine-question application that asks such questions as the names of both the lender and borrower, the borrower's Standard Industrial Classification code, and the amount of loan covered.

So far, the program has supported loans to businesses ranging from golf cart manufacturing to ranch suppliers. There are restrictions on the kinds of loans the program can support. For instance, the program cannot refinance existing loans, nor can it finance residential housing or purchased property not used for business operations. Finally, the state's maximum contribution for any loan is $35,000, which caps the loan size at $900,000.

Nonetheless, part of the reason for the program's popularity may be its relative inactivity compared with the SBA's 7(a) program. Whereas the Oregon program has supported $18.6 million in four years, the 7(a) program is estimated to generate as much as $50 million nationally in loan requests each day.

But things are picking up in Oregon.

"We're doing a pretty good business now," Mr. Huston said. "There are between five and 10 loans a week being approved through our office."

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