ARLINGTON, VA -I The Federal Deposit Insurance Corp. (FDIC) last week addressed the backing of small business loans with real estate collateral, an ongoing problem since much of that collateral has been devalued in recent years, The Street reports.

"Most businesses over the last 24 months had significant strains. If you don't have the collateral and you don't have the cash flow, then where are we making these loans? No one was able to answer that," said Frank Sorrentino III, chairman and CEO of North Jersey Community Bank.

The two-session event included public and private sector officials, including FDIC Chairwoman Sheila Bair and Fed Chairman Ben Bernanke, discussing the challenges of increasing lending to small business owners.

The FDIC recommended that banks look less at collateral values and instead focus on business cash flows when assessing whether to approve a loan, Biar said, who announced a toll-free hotline small business owners can use to inquire with FDIC officials or to register concerns about credit availability.

Karen Mills, administrator for the Small Business Administration, said the SBA is "highly focused" on stimulating small business lending, and it will soon allow business owners to refinance their owner-occupied commercial real estate mortgages into an SBA loan.

The FDIC said it would respond to inquiries about policies as well as make referral to other governmental agencies where appropriate.

"A combination of factors have created issues and challenges for small businesses, but it is turning in terms of credit availability," Bair said in a statement. "I think it is going to get better, and we're working to facilitate that."