In this file photo, Bill Hewgley, president of Metalworking Solutions LLC, shows off store fixtures that were cut with one of his company's laser cutters.

When Bill Hewgley left American Manufacturing Co., to start his own business five years ago, the 56-year-old businessman had lots of industry contacts and experience but no customers or cash flow.

Through a government-backed loan program by the U.S. Small Business Administration, Hewgley was able to pool his own savings and a loan from First Volunteer Bank with an SBA loan to get the $1.5 million he needed to launch Metalworking Solutions LLC.

"Without the SBA loan we couldn't have made it work in the early years because we couldn't have gotten a conventional loan for a startup venture like this," Hewgley said.

With a longer repayment term and less collateral required, the SBA loan helped Hewgley start a business that has already expanded twice. The growing laser-cutting metal equipment maker was recently recognized as one of the top Small Businesses of the Year by the Chattanooga Area Chamber of Commerce.

Hewgley's SBA loan was among 13 government-backed loans made last year by First Volunteer, which originated more SBA loans than any state-chartered bank in Tennessee. The Chattanooga-based bank was recently awarded the 2010 Tennessee SBA Community Bank of the Year, Top Dollar Bank and SBA Patriot Express Lender of the Year. First Volunteer made more than $6 million of SBA loans last year.

"In an environment when many banks are not lending, this confirms that First Volunteer is not only lending, but is finding ways to help business owners with their credit needs," First Volunteer Bank President Patti Steele said.

Gregory Haskew, a senior vice president at First Volunteer, said the government guarantee to repay 85 to 90 percent of the loans allows lenders to stretch out repayment schedules or offer more attractive terms and rates.

"The loans still have to make sense and we still do our due diligence with every loan," Haskew said. "But these SBA loans allow us to require somewhat less collateral or better terms, which often are critical in helping startup ventures succeed."

Across Tennessee, lenders made 627 SBA loans last year for a total of $172 million. In the first half of the current fiscal year, banks have already matched that volume, in part because of higher loan limits set by Congress for SBA loans last year.

"With the higher limit, we were able to match last year's total volume in less than six months," said Walter Perry, district director for the Tennessee SBA office in Nashville. "We saw an increase in loan activity last year and we're seeing an even bigger increase in loan volumes this year. Given the times that we've just gone through, we know that these SBA loans have been an important element in providing the working capital needed for many businesses to survive and grow."

SBA loans are made through banks and other private lenders. The federal government guarantees repayment of most of the eligible loans. SBA loans typically carry interest rates of no more than 2.75 percent over the prime lending interest rate, or 5.75 percent in the current market.