When Noel Fiscus decided to open Noel Fiscus Jewelry & Design two years ago, he had more than 15 years of professional experience, equipment, inventory and some savings – everything but a small business loan.

“I had to take out a second mortgage,” he said.

After his first year in business, Fiscus tried another option: a loan backed by the U.S. Small Business Administration. With a $150,000 SBA loan, which carried a lower interest rate, he was able to pay off his second mortgage and purchase some additional inventory.

“It was safer for (the bank) and less money for me (to pay back),” he said.

Start-up businesses such as Fiscus’ contributed to a significant increase in Small Business Administration-backed loans in Iowa in 2005. The agency approved 917 loans for a total value of $197.4 million, a 42 percent increase from 2004.

Joe Folsom, the SBA’s district director in Iowa, said a 46 percent increase in the total dollar value of loans to such start-up companies is a positive sign for the U.S. economy.

“To me, that would be an indication of confidence in the economic opportunities that business owners would see moving forward,” he said.

Folsom said last year’s increase could be attributed to an increase in the number of participating lenders. Of the nearly 500 financial institutions in the state, 208 participated last year. Some other banks benefited from an improving economy to record significant increases in their own lending numbers.

Iowa State Bank CEO John Burgeson said his bank had a record year for small-business loans. The bank issued 27 SBA-backed loans for a total value of $4.47 million in 2005, up from six loans totaling $747,400 in 2004.

“We have always had an interest in small business,” he said. “However, we’re seeing a lot more opportunities with retail development in the East Village. We’re also doing retail development in Ankeny, and we’re seeing more applications for restaurant start-ups. Those are the ideal candidates for SBA loans.” He said low interest rates led to many recent start-ups and increased residential construction.

Ray Meister, executive vice president for commercial lending at First American Bank, attributed the statewide increase of SBA loans to greater awareness on the part of banks about the program’s benefits as it relates to customer service.

“Obviously the SBA-guaranteed loans add benefit to the bank, but more importantly they benefit the customer from the standpoint that it allows the customer more favorable terms and conditions than what traditional, direct small business bank lending may have,” Meister said.

First American was the top lender in the state last year in terms total dollar amount, issuing 42 loans with a total value of $17.5 million, more than double the amount issued by Wells Fargo Bank N.A., the No. 2 lender.

“It’s a significant portion of the total small business lending that we do,” Meister said. SBA-guaranteed loans account for about 25 to 30 percent of the small business loans the bank issues annually in number and about 50 percent in dollar amount.

Meister said the program enables the bank to provide better service to its customers by offering them more options, and to lend money to some small business owners who may not otherwise have qualified. Banks are often able to receive an extended amortization and lock in a fixed interest rate, Meister said

Owners of start-up companies with some equity and an encouraging financial statement can avoid the SBA, saving the bank additional paperwork, and sometimes saving the business owner money through lower fees and interest rates, Burgeson said. But high risk or a high loan amount can sway the bank in the direction of the SBA.

“Sometimes it’s the only way we can get the loan qualified,” he said.

Folsom said the SBA is pushing an express lending program that will allow lenders to submit loan applications electronically around the clock without the usual mountain of paperwork. About 60 financial institutions are participating in the program.

“In theory, a lender could take an express-loan application Friday morning, get approval instantaneously and close by Friday afternoon,” he said.