DAVID GREENE, Host:

The debt crisis in Europe is among the things putting further stress on the U.S. economy. And this week we're hearing about small businesses that are trying to grow but are hitting a wall.

Today, the story of an engineer in Wisconsin. Daphne Wilson runs an engineering firm and wants to expand her business, but she can't get a bank loan. It's a common problem these days.

Erin Toner of member station WUWM in Milwaukee has her story.

ERIN TONER: The heat and humidity are relentless as I drive across Jones Island, a peninsula just south of downtown Milwaukee. The island is home to the city's main sewage treatment plant. And on sweltering summer days like this, that smell just sort of hangs in the thick, moist air.

But as unpleasant as that can be, Daphne Wilson feels at home here.

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DAPHNE WILSON: Over across the way, we have the de- watering and drying building, and we handle the control systems. And the thickening and blending building, we updated motor control centers.

TONER: The 44-year-old electrical engineer started her own company, Zoe Engineering, in 1999 and she's had steady contract work at the plant ever since.

WILSON: Right now, we're looking at the two existing turbines for the sewage plant. And my new project that I've worked on with a team is to replace these with five turbines that will operate off of landfill gas. So it's definitely a big, green project.

TONER: Wilson's company employs two full-time engineers and a couple of part- timers. In a good year, it brings in about a half-million dollars. And Wilson says most years were good, up until late 2009. One client disputed a bill, and stopped payment. Two other projects were delayed. Wilson says she had to make cuts because she didn't think to establish a line of credit when business was good.

WILSON: Now again, I'm an engineer, not a business person. Hindsight, I should of went and got money when I had money.

TONER: Now, if this was before the recession, Wilson feels she would have been a good candidate for a conventional business loan. Her company had always done well, and she had contracts for future work. But in 2009, after the worst of the financial crisis, banks had essentially closed their doors to small businesses. Wilson applied for three loans and a line of credit. All were denied. Angeline Gasser with Associated Bank in Milwaukee says Wilson's company did not meet the bank's standards.

ANGELINE GASSER: She was having a little trouble with the backup funding, and she didn't have the credit rating that was required.

TONER: But Gasser wanted to keep Wilson on as a banking customer, and hopefully, a future borrower. So the bank referred Wilson to one of its partners, a nonprofit micro lender called the Wisconsin Women's Business Initiative Corporation. Wendy Baumann is the group's president.

WENDY BAUMANN: With Daphne's, it was not a hard sell. She had a great track record, but we could also see areas that she needed to shore up in her business.

TONER: The corporation borrows money from a variety of sources, including the federal government and faith-based groups. It loaned Wilson $50,000 and mandated ongoing financial counseling to help get a better handle on her cash flow situation. Baumann says micro lenders traditionally have served entrepreneurs who may be inexperienced and under-collateralized. That's changing.

BAUMANN: The last two years, we've had highest number of loan applications we've ever had. Many, many more sophisticated borrowers that I know otherwise would be bankable deals. But the banks have had to say no, and we're taking these deals on.

TONER: These days, Wilson's firm is back on the road to financial health. She meets regularly with Angeline Gasser at Associated, the bank that denied her loan application back in 2009.

WILSON: I'm in a lull again now.

GASSER: And it happens.

WILSON: Right.

GASSER: But then you jump right back.

WILSON: But I have like five contracts starting in August, I'm going to be pulling my hair out again.

TONER: Gasser encouraged Wilson to open separate checking accounts for payroll and taxes, and she keeps an eye on the accounts, hoping Wilson will soon be credit-worthy.

GASSER: I need to see that her accounts are stable, not such a big fluctuation in account balances, I mean, where one day she'll have $40,000 in her account, and the next day, she's got $100.

TONER: If there's a silver lining to the recession and the ensuing credit market, Wilson says she's becoming a better business person.

WILSON: I've had opportunities to grow, and I didn't, you know, just let me just handle what's before me. And now I'm thinking about it.

TONER: Wilson is a bit coy about an opportunity she says has been on the table for some time. I asked whether it involves bigger projects, hiring more engineers, or taking over a larger firm? Her answer? All of the above.

For NPR news, I'm Erin Toner in Milwaukee.

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GREENE: Tomorrow we'll bring you the story of an icemaker in Queens, New York.

Unidentified Man: My ice is crystal clear and it's the premium product in my eyes.

GREENE: We'll hear why the quality of his ice hasn't helped him break into the major grocery chains.

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GREENE: You're listening to MORNING EDITION from NPR News.

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