Aug. 9--Carolyn Jackson recently found herself in a common situation for small-business owners: She knew from customer feedback that she should expand, but she also knew it would be difficult to convince a bank to give her a loan to do so.

Jackson owns Core Kinetics in Bellingham, which offers a variety of exercise and dance classes, including Pilates, yoga and martial arts. Her Bellingham studio was doing well, but she was drawing a significant number of clients from the Birch Bay and Anacortes areas. With rising fuel costs, she wanted to open small studios in those areas. She was able to get a bank loan to open a studio in Anacortes and decided to wait on Birch Bay, but then found an ideal spot for her third studio at 4819 Alderson Road.

Having just opened a new location and not having much collateral, Jackson knew she couldn't get another loan from a bank, even though it was under $20,000. She turned to On Deck Capital, a company that services loans to small businesses who get denied by banks and was able to get the Birch Bay location open in May, less than six months after opening the Anacortes studio.

"It worked out well," Jackson said. "They (On Deck Capital) have higher interest rates, but a shorter payoff period. It turned out to be a good move, because both studios are already turning a profit," Jackson said.

Although Jackson had to find an alternative source for lending, she knew from past experience that probably would have been the case even a few years ago, when the national economy was booming. Many local commercial bankers appear eager to finance commercial projects, but with a couple of caveats: They are taking a closer look at the numbers and are avoiding many residential projects.

"I'm looking harder at things like the carrying capacity of a borrower, because the overall economy has slowed to a point where it's important to know what would happen if some of the customers stopped coming," said Terry Daughters, a commercial banker at Peoples Bank.

While local commercial lenders are looking at loans with more scrutiny, they are also mindful of the increased competition locally. Between June 2006 and June 2007, there where five new bank branches built in this area, bringing Whatcom County's total to 76 branches with $2.9 billion in local deposits, according to the FDIC. In comparison, Yakima County, which has about 50,000 more people, has 55 bank offices. Since June 2007, Columbia Bank has entered the market, bringing the total number of banks in Whatcom County to 16.

"The marketplace for commercial lending is as competitive as ever," said Bruce Clawson, a senior vice president at Banner Bank. "Not only do you have more banks, but increased competition from credit unions and other lending sources."

Even if there are more of them around, capturing the interest of a commercial lender still takes some work from the business owner.