Natick-based Middlesex Savings Bank is among the financial institutions that have invested heavily in products geared toward the small-business owner.

According to a recent U.S. Small Business Administration study titled “The Effects of Mergers and Acquisitions on Small-Business Lending by Large Banks,” bank consolidation is jeopardizing small-business lending.

The study states that a growing share of assets concentrated in the largest U.S. banks have resulted in less lending to small businesses. However, despite the plethora of mergers in the Bay State, community banks say small-business lending is going strong.

“[Over the last 18 months], our lending and our activity with small businesses has exploded,” said John McKenna, senior vice president and head of small-business lending at Century Bank in Medford.

Since the beginning of 2004, McKenna said, the bank has processed close to 900 applications for small-business loans, at least triple of what the bank processed in prior years.

Contrary to what the SBA study reported, McKenna said bank consolidation in the area has helped Century’s Small-Business Lending Department. The bank also has streamlined its products and services, which includes a 24-hour loan approval. In addition, Century branch managers have been trained to take small-business loan applications and offer guidance.

“Small businesses are dependent and reliant upon the branch network,” said David B. Woonton, executive vice president and head of all lending at Century.

Bruce Spitzer, director of communications for the Massachusetts Bankers Association, said local banks view small-business lending as a requirement.

“If they didn’t do that, other than consumer lending, what would they do with deposits?” Spitzer said.

But according to the SBA study, as banks grew larger, they did less small-business lending.

“These new findings raise a genuine concern,” said Camden R. Fine, president and chief executive officer of Independent Community Bankers of America. “Policymakers need to recognize the effect of the rapid growth and financial asset concentration in the nation’s biggest banks. Small businesses are a critical ingredient to the success of our economy and job creation. We simply can’t afford to ignore activities that jeopardize their access to capital.”

However, Spitzer said small-business lending has been popular for larger institutions.

“It’s a highly competitive battlefield,” Spitzer said. “The larger guys are offering a huge product line and services.”

Community Benefits

Many banks also offer small-business lending through SBA programs. According to Russ Dye, vice president of commercial lending at Worcester-based Commonwealth National Bank, the bank has been pushing the SBA’s 504 loan, which provides long-term, fixed-rate financing for major fixed assets, such as land and buildings. It has provided SBA loans to a handful of companies in the Worcester County area.

Jim Lavin, director of lending for Worcester Business Development Corp., said Commonwealth National is the biggest lender with WBDC. Small-business lending in the Worcester area has picked up, according to Lavin.

“At this time last year, it was frighteningly quiet,” Lavin said.

Lavin said many businesses made major purchases in the late 1990s and now these businesses need to reinvest in new equipment. Also, many companies that were once renting property are now purchasing buildings.

With the 504 loan, the private bank finances 50 percent of the project cost; the certified development company, like Lavin’s organization, covers up to 40 percent of the cost, which is backed by the SBA; and the borrower provides 10 percent of the project cost.

Lavin said he has not seen negative effects on small-business lending due to bank mergers.

“From our position, we haven’t seen it,” Lavin said.

While it doesn’t necessarily aim to do SBA loans, Dedham Institution for Savings will look at any loan request, according to Keith Keogh, senior vice president of commercial lending.

“We don’t try to categorize our customers until we’ve met with them,” Keogh said.

Keogh said for those borrowers receiving an SBA loan, there is a reason.

“They come in with some missing ingredients,” Keogh said.

Some of those small businesses may have no capital or missing collateral, nevertheless, the business idea is a good one, Keogh said.

In such cases, the bank will contact the SBA for a guarantee.

“The community is benefited because we now have some more working people and tax revenue,” Keogh said. “The health of the community is the health of the businesses in the community.”

While a new business likely will benefit the community, Keogh said, it’s not that easy to say yes.

“When I see a small-business customer, you have to show me a reasonable plan to pay the loan off,” Keogh said.

Keogh said he is not seeing the same explosion of small-business loans as Century Bank.

“Things are a little bit slow right now,” he said.

Oil prices may have forced people to hold off on borrowing money, Keogh reasoned, but there are still some businesses in need of loans.

“I’m seeing people wanting to buy real estate,” Keogh said. “The small-business [owner] is buying equipment.”

David Falwell, executive vice president at Natick-based Middlesex Savings Bank, said the institution usually seeks out businesses to serve. Falwell has seen some customers struggling, while others are having better results.

“There is a small amount of increased opportunity,” Falwell said.

As for the SBA report, Keogh said he thinks the larger banks are actually helping community banks with business lending.

“We’re still working one-on-one with customers, not asking them to dial a 1-800 number,” Keogh said.

Middlesex Savings sees more opportunities for small-business lending. According to Falwell, the bank has invested heavily in products geared toward the small-business owner.

“We really need to build our capabilities,” Falwell said.

Another benefit of small-business lending for banks is the opportunity to offer services outside the small-business lending circle. Companies also need credit cards and deposit accounts and generally use the same bank for those products and services. Because many of the businesses are family-owned, individuals also tend to open consumer accounts with the same bank.

“You wind up cross-selling,” said Woonton of Century Bank.