When John Smithline, 63, needed funds to expand his T-shirt printing business in Rockford, Ill., a guarantee from the Small Business Administration (SBA) earlier this year helped him secure his $465,000 loan.

And when business collapsed when the economy tanked last fall, and Smithline was forced to lay off more than 70 of his 106 workers at Guerilla Graffix, an SBA-backed line of credit kept the company from folding altogether. “I gave up sleeping for about six months,” Smithline can joke, now that his sales have started to rebound and he’s been able to rehire about 30 of his former employees. “I’ve never done anything without the SBA. I mean, without them we just wouldn’t be in business.”

Rockford, an automotive and manufacturing center in northern Illinois, is typical of the many communities around the country that have been hard hit. Unemployment tops 15 percent, and the larger firms that once were the economic bedrock have been undermined by global competition. Despite a diversified base of agribusiness and machine tool manufacturers, very few large companies are hiring.

As in other parts of America, bankers and economic development officials in this city of about 157,000 are hoping that a revival of small business can boost the region’s employment and economic prospects.

So a proposal announced by the Obama administration last week to boost the capital available to make small-business loans and to raise the maximum loan ceiling is being warmly welcomed by bankers and employment counselors here.

“Everybody who becomes unemployed over 50 is looking at the opportunity of starting their own business,” says Pam Schallhorn, director of the Illinois Small Business Development Center at Rock Valley College in Rockford. “Some have already been laid off as many as three times in the past five or 10 years, and they are tired of trying to rely on a company to supply for their financial security.” As a result, Schallhorn says her center is “inundated” with older Americans seeking to start small businesses of their own.

“Anything that makes it easier for our community banks to lend is a positive thing,” she says, because instead of seeking some large new factory to move into town, “we have to grow our own. That’s my philosophy of economic development.”

A year after the Treasury Department came to the aid of the nation’s largest banks to prevent them from collapsing, President Obama said last week that the nation has “a long way to go” to ensure that credit flows to small businesses like Smithline’s that create jobs in places like Rockford hit hard by recession.

“There are still too many entrepreneurs who can’t get the loan they need to open their doors and start hiring,” Obama said. “There are still too many who are struggling to make payroll and stay open. And there are still too many successful small businesses that want to expand further and hire more but just don’t have the capital to do it.”

Help for Main Street

The administration endorsed legislation that would in part:

• Expand from $2 million to $5 million the maximum size of 7(a) loans, which help businesses invest in machinery, equipment, land and buildings.

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