Guy T. Williams, a Louisiana banker, had never done business with Willie Simms, head of a local union for streetcar and bus drivers. But that didn't stop Williams from lending Simms $77,000 last month -- with no collateral, no paperwork and little more than a promise to pay it back.

"My people hadn't gotten paid in two weeks," said Simms, president of the Amalgamated Transit Union Local 1560. The banks didn't know him, he said, "but I told them I had guys who were in shelters, couldn't get to their local banks and were down to $3."

The next day, Williams, president of Gulf Coast Bank & Trust Co., sent a few employees to the Baton Rouge shelter where Simms and some of his workers were staying because their homes had been flooded by Hurricane Katrina. The bank staffers gave out small white envelopes -- each containing $700 in cash -- to 110 of Simms's workers.

The bank did "a great thing," said Simms, who has since repaid the loan. "They stepped up to the plate."

Since Katrina ripped through the gulf region, local banks have faced a twofold challenge: As they struggle to reopen their branches, they must also help customers who are also trying to rebuild or restart their businesses. In this environment, some banks are making new loans with little assurance they'll be repaid, even while wondering what will happen with prior loans for local businesses, houses and cars that suffered severe damage from the storm.

"These businesses have to keep going because they're vital in saving our community," said Williams, who also is the former head of the Louisiana Bankers Association. "We're the ones who know how to do it, and we want to do it."

Williams visited Capitol Hill last week, hoping to convince lawmakers that Louisiana banks are better equipped to dispense small-business loans than the federal government. "I don't think people in Washington truly understand the magnitude of the disaster or how much we really need," he said. "People listened, but they don't truly comprehend it. I'm not optimistic that things are going to happen."

In the days immediately after Katrina, Williams, who volunteers for the sheriff's department in St. Bernard Parish just east of New Orleans, used his pirogue -- the Cajun word for a flat-bed canoe -- to rescue stranded residents in New Orleans. But now he has returned to banking full time, reopening six of his nine branches throughout southern Louisiana.

In St. Bernard, which was virtually wiped out by tidal surges, Williams's bank is operating out of a trailer in a parking lot -- a few miles from Shorty's Po' Boy restaurant, the only other business open in the area.

Williams has made $20 million in new loans over the past month, he said, including a loan to a businessman who needed to buy three dump trucks to remove debris and another to an electrician who needed to front-end some wages for workers he was hiring from out of town.

"Normally we make about $30 million in loans a month, so doing $20 million in a month isn't bad considering what we had to deal with," Williams said. "We've had no phone lines and tough communications."

Nevertheless, he estimated that $20 million worth of his bank's prior business and home loans were affected by the hurricanes -- and that two-thirds of those properties were not insured against flooding.

"The government said they weren't in a flood zone, so they didn't have flood insurance, and now customers could lose a tremendous amount of money," Williams said. "If they don't have other assets, that turns into a bad loan for us."

Although no loans from Gulf Coast Bank & Trust have yet gone unpaid -- in part because Williams and other banks have allowed payment extensions -- Williams expects some defaults. He said he thinks bankruptcy notices may have not reached him yet because of spotty mail service.

"We know they're coming but we haven't received anything," Williams said. "I guess in the spring we'll get the Christmas catalogues and along with them the bankruptcy notices."

MidSouth Bank in Lafayette, La., has extended about 300 loans since hurricanes Katrina and Rita struck, said bank President C.R. "Rusty" Cloutier. He estimated that out of about $400 million in total outstanding loans, MidSouth has about $8 million worth of business loans in the "hit zones," as he called the areas of Louisiana and Texas affected by the storms.

"Most of these people are folks who are out of work for a couple of weeks or they needed some money because the costs of being on the road has gotten to them," Cloutier said. "Schools are starting to reopen and people are coming off of the low point."

In Pascagoula, Miss., where Katrina flattened homes and left only concrete slabs behind, Lora Michael, chief executive of Jackson County Federal Employees Credit Union, has seen her operations improve slowly.

In the first weeks after the storm, Michael doled out cash withdrawals from the back of her white SUV, with an employee's husband standing guard with a .38-caliber pistol. Now Michael serves her 600-some credit union members from a small, beige trailer that sits a half-mile from her credit union's flooded office.

She has received donations of paper, phones, computers, desks, chairs and the trailer from credit unions in New York and Colorado.

"We have phones, and we're expecting DSL any day now, but we still don't have bathrooms," Michael said.

Each day she sends an employee about 10 miles away to another credit union to process ATM transactions and update balances. They've also spent hours trying to dry out car titles and loan documents. "It's amazing what sunshine and Lysol can do," Michael said.

She said she's still making auto loans, as many customers are getting insurance payments for their flooded cars. "People have gotten money from FEMA or money from their insurance and they're catching up on their loans," she said.

But the credit union is still open only three days a week. The rest of the time, Michael and her five employees are setting up bookshelves and furniture for the trailer, or repairing their own homes.

"We're all trying to get our lives back in order," she said. "It's getting better but we're still not there."

Steven J. Rando has waded to his New Orleans law office.Gulf Coast Bank & Trust is using a trailer behind this branch office. At top, Steven J. Rando has waded to his New Orleans law office.This St. Bernard Parish barbershop, where Gulf Coast Bank & Trust President Guy Williams stands, is among devastated customers.

A donated trailer serves as branch office for Lora Michael's credit union in Pascagoula, Miss.