Philadelphia-May 20, 1999- Small businesses are the backbone of the American economy. They create two out of every three new jobs, produce 39% of the Gross Domestic Product and lead to more than half the nation's technological innovations. But as the bank merger frenzy continues to slash the number of banks in half, small businesses are increasingly becoming boxed out of financing alternatives. In a disturbing trend for the Delaware Valley's 140,000 small businesses, newly merged national banks are "non-renewing" their participation in regional micro-loan lending programs. However, a recent crop of community banks is heeding the calls of small businesses and opening their doors to find new and innovative ways to lend money.

One of the newest of these leading edge banks is Pennsylvania Business Bank (www.pabizbank.com). Through the use of asset-based lending and other innovative loan techniques, Pennsylvania Business Bank is leading the way with a host of new services specifically designed to target small business lending.

To answer the small business need, Pennsylvania Business Bank is reinventing the way community banks make and monitor loans. Through the use of an Internet-based, state-of-the-art technology hub, Pennsylvania Business Bank is able to offer small business loans over the Web with approval in less than 48 hours. And business owners can review their account activity 24 hours a day.

"Thirty years of banking experience helps me see value where other more traditional banks can't," said Alan Fellheimer, Pennsylvania Business Bank's President. "In order to grow, lenders have to give consideration to peripherals that larger banks simply are too big to deal with."

Pennsylvania Business Bank's small business focus enables it to take advantage of the changes in business-lending arena. First, the mega-mergers have, in essence, priced the big players out of the marketplace. The threshold loan amount for business lending at the big bank level is now in the $5-10 million range. Pennsylvania Business Bank brings business lending down to small business size, starting as low as $50,000. Second, Pennsylvania Business Bank maintains relationships with several area accounting firms specifically engaged to find non-traditional value on a balance sheet. Combined with 30 years of workout experience, Pennsylvania Business Bank is uniquely suited to make loans where other banks are simply too big or the structure of loan is too novel for other banks to handle.

For example, James Flanagan, a Northeast Philadelphia painter, went to five different banks before he even received an application. Because of the size of the loan he was seeking ($100,000), he realized his options were limited to finance companies, which were only willing to lend to him based on the equity in his home, with no recognition for his business assets. Until he found Pennsylvania Business Bank, Flanagan was looking at paying 8-10 points above prime. PBB was able to see the inherent value of Flanagan's strong track record of receivables and make a loan based upon this value.

The trend in cutbacks in small business lending has been evolving for some time. The Philadelphia Small Business Micro Loan Fund, which started out with 13 banks in the early 1980s, is now down to six. Over the past four years, it provided 80 loans amounting to more than $1.4 million to neighborhood businesses like barbershops, jewelry stores, travel agencies and grocery stores. Similarly, since 1996, the Ben Franklin Technology Center has been able to loan $189,000 to 17 projects.

The crisis for small businesses searching for loans is not over. For the current federal fiscal year, the U.S. Small Business Administration has approved only 491 loans. This represents approximately 75 loans per month, whereas the average for the previous two years was close to 110 loans approved per month. As the big banks continue to merge and participation in loan programs continues to wane, small businesses will be left out in the cold. One expert estimates the need for small business financing at approximately $3-10 billion.

"We can't compete with big bank rates, but the big banks aren't lending to guys like Jim Flanagan," said Fellheimer. "Where else are these guys going to turn for a fair deal?"