Dennis Melton's job is to say yes when bankers say no. He runs the St. Louis district of the U.S. Small Business Administration.

Bankers divide small-business borrowers into three categories: yes, no and maybe. Bankers smile on borrowers with strong cash flow, valuable collateral and good credit histories. They get loans. Businesses with none of those get shown the banker's door.

Then come a large class of businesses with some of the qualities that bankers like but not enough to make the bank part with its own money.

That's where Melton steps in. The SBA guarantees the bank repayment of 75 to 85 percent of the loan value in the event of default. With the taxpayer bearing most of the risk, bankers are happy to lend.

The bad news for borrowers is that they must pay the SBA a fee equal to 2 to 3.5 percent of the guaranteed amount. The fees cover the SBA's losses when businesses fail.

The recession has made bankers tighten credit standards, while many businesses have seen their cash flow shrivel. That's made the SBA more important to small businesses needing loans.

Melton is a St. Louis native and a career civil servant. He's spent 34 years with the federal government, mainly in the Department of Defense in human resources posts, rising to chief of the Business Management Division of the Defense Enterprise Computing Center St. Louis.

He moved to the SBA as deputy district director in January 2005 and rose to director in September 2005.

Say I'm a small-business owner. My bank is in trouble and my banker says he can't renew my loans. I'll have to take my business elsewhere. What can you do for me?

I'd first ask a few questions. What's your credit like? I want to make sure you're still a good candidate for another bank.

I'd take them to our website (www.sba.gov) and walk them through how to find an SBA lender. I'd tell them who our top 10 lenders are, so they'd know who is still lending (see accompanying list).

I'd say: "The next lender you go to is really important, because this is probably the lender you'll stay with for life. You want to find someone you're comfortable with and who is comfortable with you." You want to bring that banker in as your partner. That's real important; more important than saving a quarter percent on the interest rate. Just like you want your doctor there when you're sick, you want your lender there when you need some assistance.

Banks like to have your business account as well as your loan, so they can see what's happening. They know your cash flow. They can feel a little more comfortable making a loan. They are moving away from "I want to make you a loan" to "I want to be your business banker."

We had some big banks, like Bank of America, fall out of your top SBA lenders list. What happened?

They (Bank of America) pretty much stopped making SBA loans. US Bank is still very active. M&I has slowed down considerably. Our number one lender in eastern Missouri is Commerce Bank.

(Big banks that stopped SBA lending) were using a credit model, and when that model began to collapse, they retreated. They were in a self-preservation mode. They were pushing the future out to save today.

The community banks were the ones who stepped up. They weren't involved in the housing bubble. I could see that some of our community lenders were outperforming our national lenders.

We've hired a young man here who was an SBA lender at Commerce Bank. He's been real helpful to banks that want to become involved in SBA lending.

The SBA is guaranteeing loans that a bank on its own would not consider creditworthy. How do you make the decision to back a loan?

In many cases, we delegate that to the bank. We have a "Preferred Lender Program." Banks in the program have made many SBA loans and we've tracked their default rate. We'll delegate authority to them, and they can make their own decisions.

Conversely, if we have a lender who has a high default rate, we pull the SBA authority and they can't make SBA loans anymore.

We're the federal government and we have to protect the taxpayer's funds. There are some people who have so destroyed their credit that banks won't even make the loan even with an SBA guarantee. Treat your credit score like gold, because it is.

There's another program called SBA Express. The bank uses its own processes, and you'll get a 50 percent guarantee. Lots of banks like that because they don't have to learn anything.

We have a program called "Small and Rural Lender Advantage." It's for banks that are just learning to do SBA loans, and SBA reserves the credit decision on those.

Is guaranteeing loans a good deal for the taxpayer?

It generally is. Up until the Recovery Act (passed early last year) we were a zero-subsidized program — we got no subsidy. That means that when you get an SBA loan, you have to pay a fee. It goes into a fund that would cover the defaults.

Before the bad times, our losses were about 6 percent over the past 20 years. I'd suspect the rate has gone up.

Last year, the economy was so bad that Congress appropriated money to waive the fees and raise our guarantee to 90 percent. It was working fabulously. We were on pace to double our loans. The money ran out May 31. That really, really stopped us.

Up until May we were doing $14.7 million and 61 loans a month. After we ran out of money, we dropped to about $6 million and 35 loans per month. That incentive was really working.

We had about $680 million from Congress, which generated $29.4 billion in lending. It was a greater cost to the taxpayer, but if you want to turn this economy around, sometimes you have to do those things.

Now we give small businesses a choice. They can borrow under the old guarantees, or they can enter a queue. People in the queue will get loans under the Recovery Act program if Congress appropriates more money.

Do you do anything else besides guarantee lending?

Very, very smart people may know their industry, but they often don't have business acumen. So, come to us and we'll send you out for counseling.

SCORE, a nonprofit counseling agency for small businesses, gets a grant from the SBA for counseling. The Missouri Small Business and Technology Development Center also gets a grant.

The Grace Hill Women's Business Center in north St. Louis city also gets partial funding from the SBA, as does the Veterans Business Resource Center.