Small-business owners across the country have complained that the recession spooked banks into overly tight lending standards, making it almost impossible to finance growth.

But under an enhanced Small Business Administration program, many Western New York firms have found a lending source.

Partners Packaging, a industrial packaging supplier in North Tonawanda that does more than $1 million in sales, needed money for cash flow and to buy new equipment. The 13-month-old company makes stretch film, packing "peanuts," bubble wrap, carton sealing tape and corrugated boxes for 90 Western New York manufacturers and distributors.

So it developed a business plan with the Small Business Development Center at Niagara County Community College and obtained $200,000 from M&T Bank in July, including an operating loan, an equipment loan and a line of credit. That allowed it to put in new equipment to make wooden crating for a new product line, buy more inventory, add three employees and more than double its customer base.

"The loan itself was instrumental in allowing us to grow and grow quicker," said co-owner and President Robert Cefalu.

That loan was granted under the expanded SBA loan program, funded through the economic stimulus, that more companies are utilizing.

Drasgow Inc. benefited from one such loan from the Bank of Castile. The 7-year-old Wethersfield-based machine shop makes specialized screws, nuts, bolts and other small parts for automotive, utility and molding companies, all in Western New York. Owned by Karl W. Drasgow, it currently has fewer than 10 major customers and has nine employees.

The company obtained a $98,400 SBA-backed loan two weeks ago to buy a new vertical drilling machine so it can diversify its business. That will enable it to do business with new customers as well, and Drasgow said that it will take his business to more than $1 million in annual sales.

"This was key for my company to market our products to new customers," he said.

SBA loan approvals in the Buffalo District Office, covering Buffalo and Rochester, rose by 7.2 percent in the fiscal year that ended Sept. 30, while the dollar volume soared by 41 percent.

Specifically, the agency's local office approved a total of 724 loans totaling $108 million in its 14-county market area, under its flagship 7(a) program. That's a 7.1 percent rise in loan numbers and a 51 percent increase in dollars.

The 7(a) program, which covers most of the agency's loans, provides private lenders with government-backed guarantees that most of the principal of their loans will be repaid if the borrower defaults. Thirty-two lenders participated in fiscal 2010, including credit unions, up from 26 in the previous year.

Additionally, the SBA's Buffalo District approved 54 loans for $20.2 million under SBA's 504 program, designed for purchases of real estate, equipment or other fixed assets. That program locally grew 8 percent in the number of loans and 4.1 percent in dollars.

In all, small businesses in Buffalo and Rochester obtained $130.2 million in government-backed loans last fiscal year. The agency's activities locally, including loan guarantees, helped 609 businesses that employ 8,449 people, including 207 new businesses and 1,737 newly created positions.

"The Buffalo office was very, very fortunate," said Franklin J. Sciortino, district director. "We can always do more, but I'm happy with what we did."

For the 16th year, Buffalo-based M&T Bank led the pack locally in number of loans and dollars, approving 237 loans -- 127 in Buffalo and 110 in Rochester -- totaling $32 million. That's up 12.9 percent in loans and 28 percent in dollars.

"We've had a very good year, year over year," said Alfred F. Luhr III, senior vice president and group manager for business banking in Western New York. "Through all of these economic crises, we've basically been consistent and haven't wavered from our dedication to the small business customers."

Besides Buffalo and Rochester, M&T is also the No. 1 SBA lender in Syracuse, Baltimore, Washington and Philadelphia. It doubled lending in Washington and was No. 2 in New York City with 92 loans.

And it ranked sixth nationally by loans, up from ninth a year ago -- even though it operates in only seven states -- with 938 loans for $119 million, up by 36 percent. "That's our sweet spot," said M&T Chief Financial Officer Rene F. Jones. "We continue to focus on that segment because it's who we are, and we think the progress we're making there is very good. For us, it's all about small business lending."

Five Star Bank, a subsidiary of Warsaw-based Financial Institutions, came in second locally in the number of loans, with 111, down by 35 percent from 170 last year. It was fourth in dollars, with $8.37 million, down by 29 percent from $11.79 million.

First Niagara Financial Group was third in number but second in dollars, with 92 loans for $16.2 million. In dollars, that was up by 135 percent.

"The small-business customers are at the heart of our strategy and business model. It's important to us, and it's important to the community," First Niagara CEO John R. Koelmel said.

HSBC Bank USA was fourth in numbers, with 55, but eighth in dollars, at $4.6 million. That's up from 53 and $4.29 million.

Community banks played key roles in the growth. Hamburg-based Evans Bancorp was fifth in number but third in dollars, with 42 loans for $8.9 million, up threefold and fourfold, respectively. Bank of Castile also tripled its numbers, to 22 from 7, and more than doubled in dollars, to $2.35 million from less than $1 million.

"If we didn't have M&T, which is always there for us, and some of these smaller banks, I don't believe we would have done as well as we did," Sciortino said. "We've got great lenders in upstate New York."

Nationwide, SBA backed more than 54,833 loans for $22 billion in fiscal 2010, up by 14.5 percent and 29.4 percent, respectively, from 47,897 loans for $17 billion in fiscal 2009. In particular, last November, the agency posted its highest single-month volume since September 2002, with $2.18 billion in loans.

jepstein@buffnews.comnull