Soon after President Obama and his administration launched their initiative to get credit flowing again to small businesses, we took issue with the plan. For one thing, we felt--and feel--that the true problem facing small businesses, and particularly truly small businesses, is not credit but consumer spending and the economy generally; and, therefore, that the $15 billion that is to be used to purchase securitized small-business loans on the secondary market might be put to better use as further stimulus, for example.

But broader has been our concern that, as with previous efforts at greasing banks' credit wheels, such as the Troubled Asset Relief Program, the true problem is that the federal government has chosen not to compel lending as a condition of receiving government help. No wonder, as we pointed out only last week, that four financial institutions that together made up 4% of all Small Business Administration-backed loans last year have essentially shut off such loans this year. No one has told them--and "they" include Bank of America, among the absolute largest benefactors of taxpayer largesse--that they must do otherwise! This is not a problem we would have if small-business lending were a condition for receiving bailout money.

Well, now that particular chicken has come home to roost. It turns out, the Washington Post reports today, that the Obama administration's small-business credit plan is essentially D.O.A. (Karen G. Mills's morning just got a lot worse.) The problem is that all the major holders of small-business loans are not agreeing to the conditions that the plan anticipates--accepting limits on executive pay and new government oversight, primarily--in exchange for the federal goverment's buying up the loans. Actually, the conditions exist because the $15 billion is coming from the old TARP fund (remember that?), and those conditions are Congressionally tied to the use of that money. Anyway, now the current holders of the loans--who are middlemen who buy the loans from lenders and repackage them for sale as securities--say: no deal.

Um, ooops.

Specifically, the six largest middlemen, who together hold 80% of all such loans, have said it is more worth it to them to hold onto the loans (and continue to collect on the non-defaulted ones' interest payments, after all) than to sell them in exchange for those onerous conditions. Sounds logical to us.

Indeed, can you blame them? Dan Ford, the community banker we spoke with recently, refused TARP money because it would have subjected his bank to any future conditions the government decided upon. And whaddya know--yesterday, four banks became the first to return TARP funds they had received, for similar reasons.

So now the administration is apparently scrambling to salvage this. Some of the ideas are just crazy and convoluted enough to be for real. One proposal envisions a separate vehicle set up to buy the loans and then sell them to the federal government. This would create the same end result, with the loans off the middlemen and with the feds (although, we would think, at least slightly more expensively than the current proposed way), but would get around, if in only the most technical and legalistic and not entirely honest way, TARP conditions because it wouldn't literally be the federal government that was using the money directly (it would be the vehicle, rather than the middlemen, that would be subject to TARP conditions).

Other ideas have included some sort of public-private partnership (these are really zeitgeist-y!), partnership with the Federal Reserve (which is not subject to the pesky limitations imposed by Congress), or the use of funds from the stimulus package (because why should that money be spent on actual stimulus?).

We'll discuss this further as we learn more about how this screw-up happened (apparently the Treasury Department people knew all along it was a possibility) and about how the administration will respond.

For now, we leave you with the following thought: what if, instead of all of this, Obama, Secretary Geithner, and whoever else had announced that the $15 billion, the 2% of the TARP fund that the goverment has so generously decided can be used to help small businesses, would go not to more financial institutions in order to do, ultimately, whatever they want to do with it but instead was going to go directly to small businesses, through the SBA, except for the parts of it that were going to beef up the SBA dramatically so that the agency could administer the loans and could be transformed into the permanently Cabinet-level department it probably deserves to be?

Well, for one thing, we wouldn't have these problems to worry about. This is what we meant in saying that that particular chicken--the federal government's continued refusal to compel any sort of action for the public good from the banks that are, at this point, quasi-wards of the state--had come home to roost.

The always-great Independent Street brought word a few days ago of a new report on credit cards and small business (downloadable in full here) from the Small Business & Entrepreneurship Committee that concluded, in the words of the group's president, "Given all of the benefits small businesses and consumers receive from the credit-debit card industry, we should all be concerned about an economic climate featuring a credit crunch, and a policy climate leading to more regulation and restrictions that would only make matters far worse." The group's chief economist, Raymond J. Keating, who wrote the report, clarified, "There are groups leading the charge to effectively impose price controls on the credit/debit card industry through either the courts or Congress. As this report makes clear, such actions would only raise costs and reduce benefits for consumers and small businesses." Translation: small business is best served by the government taking a hands-off approach to credit cards. (Here's where we mention that our sponsor is American Express OPEN.)

Specifically, as Independent Street explains, the report argues that even government meddling with the interchange fee, which is what merchants are charged by credit card companies each time a customer uses a card to make a purchase, ought not to be meddled with. We've written about interchange fees before, and our outrage at them--their massive growth in recent years, their arbitrary nature, their almost-confiscatory quality--prompted us to suggest that policymakers pair passage of a "credit card bill of rights" (for users) with a "credit card bill of rights for merchants".

Independent Street blogger Kelly Spors, while presenting the findings fair-mindedly, also took some issue with them. "So many small-business owners I’ve spoken with in recent weeks are angry with credit card companies right now and wouldn’t mind seeing the government step in and provide them some protection. Many (even ones with good credit ratings) have seen their card limits slashed at a moment’s notice, their rates jacked up or their cards closed by the issuer-–sometimes with what seems like little justification. They would like to see the card industry held more accountable for how it treats its customers--especially now that businesses so desperately need access to credit."

For one thing, linking credit cards, and small-business owners' potential use of them to obtain financing for their companies, to the credit crunch is somewhat disingenuous. Yes, as we've reported, credit cards are not a bad alternative to financing when more traditional lines of credit, or bank loans, are not open to you. But by no means are they preferable for this purpose--they charge quite high rates (legitimately) and are subject to immediate and arbitrary rate hikes. Governmental policy to improve small businesses' credit access should basically ignore the credit cards and focus instead on what, actually it has been focused on: banks and other lending institutions, which, unlike credit cards, tend to root for you to pay back what you are owed on time.

Finally, if small businesses' role in the larger macroeconomic scheme is as job-creators, then the government's job should be to encourage them to grow, and to cultivate a situation in which their growth is as uninhibited as possible. Allowing credit card companies to further slice already-thin profit margins with oversized fees--in the process encouraging small businesses to restrict consumers' credit card use and, therefore, consumer spending--is not the way to do this.

We've recently downplayed the importance of credit to the dire situation the small-business community finds itself in. We have held that while the ability to obtain financing is not exactly a non-issue for the typical small business, it does pale in comparison to the broader problem of consumer spending and, indeed, the general macroeconomic situation. Since most small businesses keep balance sheets that don't require much if any financing, we've argued, the federal government's efforts to help small businesses should focus more on making it easier for small businesses to hire and hold on to workers and generally to make it through the current rough patch and less on greasing the lending markets.

But a New York Times article today reminds us that there are indeed some small businesses for whom credit--even more than consumer spending and the like--is a lifeblood. Specifically: start-ups whose main product may not be realized yet--their cash flow, after all, is essentially zero, even if one day it could prove massive. The article looks primarily at InfraReDx, a start-up based in the life-sciences Silicon Valley that is the Route 128 corridor south of Boston. Some day, its system, still in the experimental stages, to diagnose heart diseases could prove immensely lucrative (and could also save a ton of money on health-care expenditures by catching problems before they worsen and require further care). But right now, it's not making all that much money, and has therefore had to lay off employees and struggle to keep investors interested.

Their story, and those of other similar medical start-ups, makes for chastening reading. These companies are exactly what we expect and should celebrate in the wake of a recession. Just as the earlier-'90s recession gave birth the tech boom, so this recession should set lots of ambitious entrepreneurs on course for a life-sciences boom, or perhaps an IT boom, or God knows what--but certainly a boom of some kind! It is the InfraReDxs that could make what comes next the Age of the Entrepreneur.

Or, alternatively, the Age of the Entrepreneur--and of American's renewed global dominance in the area of innovation--could get smothered in its crib, a victim of, yes, the credit crunch.

To be sure, difficulty obtaining financing is not InfraReDx's only problem. It is also selling far fewer catheters related to its system than it had expected to as a result of the recession; so putting more money in the hands of hospitals and other health-care providers would also help its cause.

But it does appear that maybe what the company most needs is easier access to credit. Of course, even if in this instance the Obama administration diagnosed the problem correctly, its solution still leaves much to be desired.

Well if small businesses' larger macroeconomic role is, as President Obama has said, as job-creators, then things are looking bad indeed. Yesterday the payroll firm ADP released its celebrated monthly jobs report for March, and the outlook isn't brilliant. In that one month alone, small businesses--those with one to 49 employees--shed approximately 284,000 jobs out of a total of 614,000 net total lost positions.

Other rundowns of the report--see Fortune's and Independent Street's, for example--focus on the overwhelming dynamic at play here, which is that the small businesses, which previously had shown the most immunity to the recession, particularly in the realm of jobs, are now being hit as hard if not harder. The phenomenon is best summed up in the report by the head of Macroeconomic Advisers, which conducts the research for ADP: "The resiliency displayed by these businesses earlier in the recession, as compared to medium- and large-size ones, is no longer apparent."

A very quick look at the March numbers bears this out:
Total net positions lost: 614,000
Total at large businesses (500 or more workers): 128,000
Total at medium-sized businesses (50 to 499 workers): 330,000
Total at small businesses (under 50 workers): 284,000

It's the depth of the current mess as well as the credit crunch that has led small businesses to get hit so hard, if belatedly. What many of them did was to avoid cuts longer than the big businesses in the hopes of a relatively quick recession. This is a smart strategy--small businesses' balance sheets tend to be such that they can get away with this for longer than large corporations can, particularly if a little bit of tide-you-over credit is available. However, this strategy became untenable as credit became increasingly scarce and as it became increasingly apparent that we are not going to be out of the woods any time soon.

The report, for its part, predicts continuing declines throughout 2009, with a recovery expected in 2010. Gulp.

It is now absolutely official: earlier this morning, a bit over a day after being unanimously passed by the Senate Small Business & Entrepreneurship Committee, Karen G. Mills was confirmed, via unanimous consent, by the Senate and became the 23rd Administrator of the Small Business Administration. We think this is a good thing.

Mills had said at her confirmation hearing, "The sum of my experience is this: I am a believer in American small business. I am a believer in America’s ability to manufacture goods and services that are world class, and I am a believer in America’s spirit of entrepreneurship. This spirit is one of our country’s greatest assets and we need to cultivate it today, more than ever.”

The earlier confirmation hearing appears to have gone swimmingly (click here for video of it). Sen. Mary Landrieu (D-La.), the committee chairwoman, amusingly remarked, "I know that we will all be relieved that after reviewing Ms. Mills’ and her husband’s joint federal and state returns for 2003 through 2007, the tax returns look to be in order and complete in all material respects." More seriously, Landrieu lauded Mills's record of balancing "her role in private, for-profit enterprises with active involvement in her community," particularly in helping Maine's economic developmen, as well as her stellar C.V. (Landrieu also confirmed what we had long supposed: that Mills was in fact specifically recommended for the job by the committee's ranking member, Sen. Olympia Snowe (R-Me.).)

At the hearing, without going into specifics, Mills pledged to implement those provisions of February's stimulus package affecting the SBA (including the new emergency microloan guarantee program, which was supposed to have been implemented already).

It wouldn't be America if everyone were happy, and Lloyd Chapman, the curmudgeonly (in a good way!) president of the American Small Business League, took to the digital pages of the Huffington Post to express his skepticism. Chapman, who has previously criticized Mills's selection due to her association (and, he argues, identification) with the venture capital industry, predicted, "Mills will most likely ignore the seven years of federal investigations that found hundreds of billions of dollars in federal small business contracts actually went to Fortune 500 firms and thousands of other large businesses" (a phenomenon we've reported on, here for example).

He concluded, "She will likely bring the SBA solutions for 'problems' that are non-existent for 99 percent of small businesses. Solutions that will include phrases like 'angel investors,' the ever popular, 'increasing access to capital,' and the latest phrase for wealthy investors looking to dominate government small business contracting programs, 'investing in America.'"

We agree with Chapman that focusing on "increasing access to capital" is in fact likely to help most only the top one or so percent of small businesses. However, we don't think it's unimportant. More importantly, we have hopes that Mills--whose record suggests, more than anything else, intellectual rigor, competence, and empiricism--already understands, or will quickly come to understand, that what most small businesses need is an economic climate in which it is easier for them to hire and keep employees and in which consumers are likely to start spending money at their businesses again. The great work begins.

We like video, especially on Fridays. We like discussing Karen G. Mills and the Small Business Administration. And, frankly, we like American Express OPEN, mainly because they're our sponsor.

So we are pleased to present, for your Friday afternoon viewing pleasure, this panel from the OPEN Forum, featuring five experts in the small business field, discussing what comes next for the SBA in light of Karen G. Mills's ascent. Give it a watch.

Karen G. Mills is now your Small Business Administration...Administrator (your Small Business Administrator?). Go celebrate this weekend--by reading these interesting articles!

Linking in to LinkedIn. How to let the networking site work for you. [Forbes]

The Obama lending plan goes kerplunk. Robb Mandelbaum analyzes the fallout. [The Entrepreneurial Agenda]

Pricing as marketing. Lowering your prices can even be a great advertising move. [Inc.com]

Better record-keeping. Is tax season harder this year because your employees' information is on outdated software? Don't make the same mistake next year. [Fortune]

The end of hourly billing? The recession has moved many law firms in the like towards different compensatory models. [Wall Street Journal]

Payroll tax holiday now! The National Federation of Independent Business continues its lobbying. [NFIB]

On Tuesday, April 7, Season 5 of one of my favorite TV shows, Rescue Me, premieres. And I’m reminded of how actor John Scurti came to be an “overnight success”.

Diehard fans of this edgy TV series, which airs on FX, know John Scurti as the character actor who plays firefighter/poet Lt. Kenny “Lou” Shea (pictured at right), one of the key and continuing roles in the series. But it took Scurti ten years to land it. He made his film debut in the 1993 comedy Who’s the Man?, but got only small roles on TV during the next decade.

But, while filming Who's the Man? he had struck up a friendship with the film's star: the then fast-rising Denis Leary. Ten years later, Leary, the co-creator of the series, tapped him for the plum role of Lt. Shea. Now, his career is very much on the ascent.

So what does his story have to do with business owners? Simply this: it’s another example of the fact that relationships matter. Some we have to work at, and others just happen because we were in the right place at the right time. But the point is also that it’s not just who you know. It’s about nailing every “part”, however small, so that the “someone” wants to know you, and you’re prepared to be an overnight--or ten-years-later--success.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

This weekend, the New York Times tackled a subject that, as you can see, is near and dear to our heart: the modern-day Gold Rush that is the making of applications for the iPhone and other smartphones. Have a good idea? Have some basic programming know-how (or the time and willpower to learn)? Then the iPhone could literally make you a millionaire.

The article is chock-full of interesting nuggets (gold nuggets?), and, if read the right way, solid advice. For example, one app was selling modestly at a price of $4.99. But when a simpler version of it was made downloadable for free, in order to get users hooked, and the full version's price dropped to $2.99, it really took off. Also, who knew that already there were more than 25,000 applications in the Apple app store alone?

One ironic aspect to this trend, incidentally, is that the recession is if anything accelerating it by giving talented people who ordinarily would have jobs with larger companies the time, if involuntarily, to strike out on their own as entrepreneurs. One profiled app creator was recently laid off from Sun Microsystems, for example.

In fact, in a subsequent blogpost, the author of the article sounded a note of caution about the increasing glut of apps, positing, "As more developers seek their fortune in the glossy curves of the device, the App Store is becoming crowded. Competition is spiking, driving down application prices--and the chances of becoming the next iMillionaire." The saving grace might be the iPhone's 3.0 application system, forthcoming this summer, which should grant app-makers new methods for monetizing their products--although even this could turn out to be a boon largely to those big corporations that offer apps rather than mom-and-pop app-creators, the author argues.

Of course, there's also always Blackberry App World! TechCrunch has an interesting review of Research In Motion's counterstrike to the iPhone juggernaut here. So there's another available platform for developers; expect something similar at some point from Google for its Android smartphone operating system.

And one more thing. We really couldn't make up so perfect an example of the way in which these smartphones, like so much information technology before them, are serving as a great leveler that gives even the smallest of start-ups and even the most novice of entrepreneurs a bona fide way to compete with the big guys. It's not enough that Stanford, whose symbiotic relationship to nearby Silicon Valley has been well documented (Stanford was of course once the academic home to Sergey Brin and Larry Page, among many others), offers a popular course on--what else?--how to develop an iPhone app. Now, though, you don't have to go to Stanford to view the course. Rather, reports TechCrunch, you can go right ahead and download it, for free, to your iPhone as a video podcast. How appropriate.

Robb Mandelbaum over at Inc.com's Entrepreneurial Agenda responds to our post on the implosion of the Obama administration's small-business lending plan. He persuasively argues that one of our ideas, which is to compel TARP recipients to lend certain amounts to small businesses as a condition of getting the dough, is misguided, while backing another idea which we've endorsed (and which we would've preferred to begin with) that would see the Small Business Administration, at least for a time, making direct loans.

His arguments against using TARP are particularly well-made. It does seem as though TARP funds should either be used for banks too threatened to make riskier loans or, alternatively, should not be used at all (as with healthy banks who have already started to return previously accepted funds, to say nothing of those healthy banks, like that of community banker Dan Ford, who refused the funds in the first place). Giving it to banks without an explicit and immediate stake in the banks means, for better or for worse, treating them still as private actors--and so to then require the funds to be used in a certain way probably doesn't make much sense.

And then, of course, there are TARP's strict conditions on recipients, such as limits on executive compensation, which is what sunk the Obama plan in the first place.

Using TARP to compel lending, or to buy loans, or really anything else that involves dealing directly with the private sector would necessitate either private-sector counterparties desperate enough to agree to these conditions or the creation of a "special vehicle" that would exist as an intermediary between governments and banks (or lenders or holding companies or whoever) as a way to get around the TARP requirements. The Washington Post reports that creating such vehicles is becoming a broader objective for the administration. Frankly, and apart from whether it might create good or bad results from the perspective of small businesses (which is obviously far from a foregone conclusions), these vehicles rub us the wrong way. The fact is that only Congress is supposed to be able to appropriate money (indeed, it's bad enough that the Federal Reserve, which is subject to extremely little oversight from Congress or from anyone else, essentially possesses appropriating powers as well through its ability to literally print money). Congress appropriated the $700 billion in TARP money, and it did so with these various conditions. Creating these middlemen--which are by definition more expensive and less efficient--with the express purpose of doing an end run around the terms Congress set in disbursing the money in the first place makes us queasy.

Which leaves us where Mandelbaum is left: let's give that TARP money, some of it anyway, right to the SBA, where it can beef up its technology and staff (Mandelbaum suggests hiring some of the more talented and recently laid-off bankers) so that they can lend the money directly.

We at BizBox are, of course, devoted to looking out for and celebrating small businesses. Additionally, we have long held that one way small businesses can level the playing field, which in many ways tilts towards larger firms, is through cloud computing, and so we have been big proponents of cloud computing. What all this means is that when we find out about a single entity that awesomely combines the two, you can be sure we'll flag it.

In this case, an article in the New York Times alerted us to Zoho Writer, a word processor that combines the convenience of Google Docs, which is cloud-based but can be used offline, with some of the frills of the collosus of the word-processor division, Microsoft Word. (We're big Google Docs fans, yet we do frequently find ourselves frustrated by its major service gaps: what we mean to say is, it doesn't even have a word count!) Zoho Writer is put out by AdventNet, a small, privately-held Silicon Valley firm.

Much of the article dwells on the fact that if Microsoft thinks it can continue its dominance with a suite of firmly, rigidly offline software, it is dreaming (a point we made in discussing Google Chrome, the browser).

But mostly, the article--check it out--can be appreciated as a nice, small (at least smaller) businss success story. Zoho Writer has managed to carve out a niche between two of the tech industry's true software giants, Microsoft and Google. Not bad.

Two articles give two perspectives on what sells during down times. In brief: nostalgia and free food.

The New York Times reports that in coming weeks Coca-Cola, PepsiCo, McDonald's, General Mills, and others will run ad campaigns featuring genuinely vintage or faux-vintage slogans and iconography. And remember that jingle: "The touch, the feel, of cotton...the fabric of our lives"? Well, you'll be hearing that again too. (If you need a refresher, click here.) The use of nostalgia to sell is nothing new, the article notes. What is original is the sped-up up nostalgia timeline, a consequence, likely, of the Internet: "It used to be that an anniversary would be commemorated if a brand or product lasted 20, 25 or 50 years. But a campaign from Viacom and its licensees promoting SpongeBob SquarePants and his friends carries the theme 'Celebrating 10 years of happy'" (yes, apparently SpongeBob SquarePants is ten years old). Nostalgia marketing is particularly conducive to recessions because when times are bad, there's no time like the happy past (no matter if that past actually was particularly happy or not).

Meanwhile, Independent Street questions the Econ 101 conventional wisdom that there are no free lunches, pointing to new marketing ploys by the likes of Denny's (whose smart recession marketing we've discussed before) and Cici's Pizza that involve free food and the like. The fact is that while down times might appear to be the worst possible moment to further cut into your profit margins, the alternative is to see potential customers stay at home and save their money. And the best profit margins in the world, after all, won't do you any good if no one's buying your product.

One thing we've talked about in discussing federal contracts (and small businesses' attempts to get their fair share of the pie) is a paradox at the heart of President Obama's governing philosophy. You have probably the most liberal president in 40 years, who in his budget has proposed significant spending increases in just about every conceivable area. But you also have a classic good-government president who wants to trim unnecessary expenses and reduce the amount of work that is outsourced to the private sector. So with one hand Obama's federal government would create more contracting opportunities, and with the other it would taketh them away. Always keep in mind, meanwhile, that a mostly (but not adequately) enforced law mandates that small and medium-sized businesses receive 23% of federal contracts, and that last year they received 22% of them. In other words, as go federal contracts, so go federal contracts to small businesses.

When we last visited this discussion, it was to report on the new contracting opportunities the stimulus promises to provide. This time, we discuss the state of defense contracts, which seemed like a sure bet to continue to grow...until yesterday, that is.

What happened yesterday, you ask? Yesterday, Secretary of Defense Robert Gates--who, recall, is actually a holdover from the final two years of the Bush administration--released his budget proposal. The plan has generally received plaudits among centrist and liberal defense policy wonks; over at our sister site Slate, Fred Kaplan calls it "remarkable" (in a good way).

But what we care about is its impact on contracting. And, according to the Washington Post (also a sister publication of ours), which has in mind the perspective of the D.C. metropolitan area, which has benefited tremendously in recent years from increased military spending, "The recent surge in the Washington area's defense-contracting workforce would begin to ebb under Defense Secretary Robert M. Gates's latest budget proposal as the Pentagon moves to replace legions of private workers with full-time civil servants." Specifically, private contractors currently constitute 39% of the Pentagon, and Gates proposed reducing that to the pre-9/11 26% level. A hit for the D.C. area, to be sure; but also a hit for the myriad small businesses among them that rely on DoD contracts for their livelihoods.

And there are numerous such small businesses, as is made cleary by a New York Times article from last week with the now-ironic headline, "There's Safety in Military Contracts". This might seem counterintuitive: when you think defense contractors, you tend to think Boeing, Lockheed Martin, Northrup Grumman, and some of the other biggest corporations on earth. But in fact, from typically military assignments to more unusual ones--the article profiles the Houston small business that landed a $1.5 million sports-bra contract from the Pentagon--small businesses are all over defense contracting, and should continue to be: "They have an agility and flexibility that gives them an advantage over bigger companies," says a Pentagon small-business procurement director.

So in conclusion: DoD contracts are a safe bet for small businesses...as long as they remain a safe bet for everyone else. How that latter issue is trending is still unknown.

This is just about the smartest commentary we've read about Karen G. Mills's confirmation as head of the Small Business Administration. Anita Campbell of Small Business Trends pointed to Mills's saying, "Finally, we must--and I will--act as an advocate for small business across the administration. As Chair Landrieu and Ranking Member Snowe have suggested, I will coordinate with other Agencies, including Commerce, Labor and Energy, whose programs also affect small businesses." In other words, the part of Mills's testimony at her confirmation hearing that didn't concern credit specifically.

Campbell then writes: "When the SBA is mentioned, usually it is in connection with SBA loans. However, SBA loans touch a tiny percentage of businesses. In 2006 SBA loans accounted for just 4% of all small business credit volume, according to the Washington Post. SBA loans simply are not very relevant to the majority of small businesses—those small businesses that everyone is so fond of saying are 'the backbone of the U.S. economy.'"

Instead, Campbell proposes that Mills focus on simplifying regulations that affect (and that disproportionately affect) small businesses; work with the IRS to simply small-business tax issues; fix the small-business procurement system; make sure small business's interests are heeded as health care reform is crafted; and more. In other words, the part of Mills's job that doesn't concern credit specifically.

We agree. Credit is not unimportant. But it is in those other areas that Mills can fail, or can truly distinguish herself and make sure that, as America is remade, small businesses aren't left behind.

The Small Business Administration Office of Advocacy has released a new report on how effective tax rates--that is, what people or entities actually pay in federal income tax--affect small businesses. You can download a summary of the results here.

Basically, of all types of small businesses, small proprietorships face the lowest effective tax rate--an average of 13.3%. But this is just as much a reflection of the fact that these sorts of corporations tend to have lower receipts--which, given the progressive nature of the income tax code, tends to make for lower effective rates--as anything else. Meanwhile, effective tax rate varies fairly little among industries, with utilities on average facing the lowest (4.1%) and retailers the highest (14.2%).

Perhaps the best point the summary makes, though, is that the effective tax rate "is one element of the overall tax burden, which also includes the Federal Insurance Contributions, or FICA, tax (which falls most heavily on the smaller entities...". FICA is, of course, the official name for the payroll tax, which is both regressive (as opposed to the progressive federal income tax) and biased against smaller companies. Something to think about as the notion of suspending or eliminating the payroll tax is bandied about.

Here's a good instance of a non-credit-related policy issue that we hope new Small Business Administration head Karen G. Mills will devote some time and effort to. It turns out that America's predominant system of providing people with health care, in which working people receive it through their employers, has problems in addition to the fact that it leaves millions without health insurance.

According to this OPEN Forum post (OPEN Forum is published by American Express OPEN, which is also our sponsor), a new report finds that employees at larger companies are more likely to receive health care through their employers than those at smaller ones. Specifically: 98% of those who work at places with 200 or more workers get it; 90% at companies with between 25 to 49 workers; 75% at companies with betweenten and 24 workers; and merely half at companies with fewer than ten workers. An additional problem: only 23% of new firms are likely to offer health insurance.

Suspend, for a moment, your concerns (they are our concerns too) about workers who don't have health insurance, to say nothing of those who are not so fortunate to have jobs currently and therefore are not only not receiving pay but are also uninsured. Think, instead, about what the implications of this situation are for small business owners, and for ambitious entrepreneurs starting up new companies.

The fact is, this data is likely telling us that the burden--in cost, in paperwork, in whatever--for extending insurance to employees falls heavier on small businesses than on larger ones. That means that a small business owner has the choice of either extending this crucial benefit and thereby disadvantaging himself or herself in this dimension when it comes to larger rivals, or not extending this benefit, which will leave him or her, first, less top talent (as the most in-demand employees will choose to be hired away by larger companies that will also provide them health insurance) and, second, employees with lower morale (and, given what we know about the correlation between being insured and receiving preventive care, simply less healthy employees). All this apparently goes even more for start-ups.

This is a huge inequity--structural and imposing--and it must be rectified. We'd also briefly add that it is catastrophic for America's ability to compete with the rest of the world: if employees at our innovative start-ups don't have health insurance and those at Western Europe's innovative start-ups do, who do you think is going to get the top talent? This is a problem whose solution is likely to come from the federal government, particularly as all parties involved say they want health care reform, and they want it this year. Clearly small business has a huge stake in that debate. Who better to represent that stake and to give small business a voice than the SBA head?

We bring word today of two innovative ways to secure financing for your business outside the normal lending avenues of banks and the like. From whom can you get money from your business? From yourself and from your customers. But we don't mean in the normal ways.

John Tozzi at The New Entrepreneur writes about so-called self-directed retirement accounts, which enable you to use retirement money to invest in private companies--including, presumably, your own. The way it technically works is that you are making the investments on the retirement account's behalf. So same tax benefits, but new money for your business: not a bad deal.

Independent Street, meanwhile, reports on crowd funding. Essentially, it's micro-investing: they give you money, you give them a cut. The blog cites the example of a music site that lets you listen to a band and then decide if you'd like to invest--litteraly a dollar or two--in the band. The larger point is that your customers, particularly your more loyal ones, are among those who believe the most in your product and have the greatest stake in your success. Why wouldn't they want to see you succeed--especially when they could profit from it?

What can we say? Unusual times demand unusual actions. If we're lucky, some of these unusual actions will turn out to be wise for all seasons, and recession financing will have given birth to smarter and more effective non-recession financing.

Employers both ought to and would be wise to offer robust benefits and regular, performance-derived raises to their employees, of course. However, word is that many small business owners have had to cut back in recent months, and there's certainly logic to this, too: you're not doing your employees much good by losing too much money and forcing yourself into bankruptcy.

Entrepreneur.com has some nice thoughts on how you can extend benefits to your employees with a little less money. Lots of times, simply doing the right paperwork can give your workers a lot of extra and richly deserved pre-tax dollars, for example. None of which is a substitute for a full roster of benefits. But it might be alright for to tide you and them over through these down months.

We've known for some time now that the costs of starting a business can be at this point so low that pretty much anyone can do it. We frequently use developing an iPhone application as a typical example, but really, it's anything Web-based that can be pursued at roughly the same intensity and same cost as you would a hobby. This week, Time magazine runs a nice article highlighting this new situation.

"At no other time in recent history has it been easier or cheaper to start a new kind of company," the magazine declares. "Possibly a very profitable company. Let's call these start-ups LILOs, for 'a little in, a lot out.' These are Web-based businesses that cost almost nothing to get off the ground yet can turn into great moneymakers." Actually, we almost prefer the term they use later in the article: "ramen profitable". "It means that your start-up is self-sustaining and can eke out enough profit to keep you alive on instant noodles while your business gains traction."

So what's new bout this "time in recent history"?

The main structural change from the past, even the recent past, that Time traces is that tech companies had to secure significant funding at the outset because the costs of software, broadband, and the rest--things that are now either free or totally taken for granted (you can use free cloud computing; your broadband bill is like your electric bill)--required lots of cash on hand. Hence the need for financing, which invariably diluted the owner's stake (creating less incentive for massive success) and frequently bound entrepreneurs to business models that quickly turned obsolete. Now, if you have an idea, you can sit in your home for several hours over several weekends and give it a go: it's as simple as that.

The other characteristic of the current situation that Time points to as something likely to cultivate many more new start-ups is, of course, the recession. It's not just that many talented people suddenly find themselves jobless, having more time on their hands and more need for extra cash. The recession also lowers the opportunity cost of failure, encouraging risk-taking. And it is liable to force a certain discipline upon the entrepreneur, who lacks the normal accoutrements of good times to fall back upon.

Have a Good Friday! (Get it?)

Intrapreneurship. That's not a typo. It's a word that describes innovators within existing systems. [Wall Street Journal]

C-town. Apparently Cleveland is the place to go for small-business lending. [The New Entrepreneur]

The boss's daughter. A provocative, first-person story of running the family business. [New York Times]

Coming to America. Why immigrant-owned small businesses tend to be doing surprisingly well. [Independent Street]

Get by with a little help from my 50 new friends. A peer-to-peer financing success story. [MSNBC]

Sit back and relax. Office chair slideshow! [Inc.com]

We've long been noting that recessions can actually prove a boon to innovation and to small businesses, as the opportunity cost of not working at a large corporation shrinks, as do the consequences of failure. Most recently, we pointed to iEntrepreneurship--a.k.a. designing iPhone apps--as a perfect example. Whether you've been laid off by whatever tech company (or other sort of company) that you work for, or whether you've quit out of growing despondency at having to continue the daily rat-race grind even as your prospects for a raise or job growth, to say nothing of your stock options, have decreased, many people with ample talent and enterprise are finding themselves going into business for themselves. It's a great rearranging (or The Great Rearranging: if you can think of a better name for this phenomenon, which you probably can, tell us in the comments!).

Yesterday, the New York Times reported on perhaps The Great Rearranging's epicenter: Wall Street. (See picture: Gordon Gekko is telling you you should leave!) The financial industry's top dogs have seen their glamour factor plummet more steeply than the Dow, and with parallel remunerative loss. And so, says the Times, "Top bankers have been leaving Goldman Sachs, Morgan Stanley, Citigroup and others in rising numbers to join banks that do not face tighter regulation, including foreign banks, or start-up companies eager to build themselves into tomorrow’s financial powerhouses." It's of course the latter that we care about.

Not surprisingly, this rearranging appears to be in everyone's interest (well, except for the Goldman Sachses of the world). "Financial experts believe it is the beginning of a broader and necessary reshaping of Wall Street, too long dominated by a handful of major players that helped to fuel the financial crisis. The country may be better off if the banking industry is less concentrated, they say." The article goes on to quote an NYU finance professor: "Innovation is spreading out too. This is a good thing."

Indeed, the essential disappearance of the investment-banking industry--with all five of the major i-banks having either switched to less flexible and more regulated bank holding companies (Goldman, Morgan Stanley), been bought by bank holding companies with the aid of ample federal government subsidy (Bear Stearns, Merrill Lynch), or, er, filed for bankruptcy and disappeared (Lehman Brothers)--has left an absolutely gigantic vacuum for start-ups who now know that the only way to survive is to stay relatively small. And the fact is that, though those massive institutions listed above got way out of control, i-banking remains a valuable and useful--actually, an essential--service for the economy as a whole.

Furthermore, to echo the NYU professor, even innovation in the financial industry, the fruits of which have been given an extremely bad name in recent months, isn't necessarily a bad thing. In theory, credit default swaps were a good idea, potentially a way for cautious investors to hedge their assets. It was only in the hands of out-of-control and underregulated financial supernovas like AIG that they turned sour (admittedly very, very sour).

So it's not hard to see how The Great Rearranging, even (especially) in the financial sector, is going to benefit the country as a whole: new financial businesses should be able to provide the type of innovation that lets the United States maintain its global financial and economic predominance while using the benefit of experience (and being hemmed in by tougher, smarter regulation) to avoid future catastrophe. And it's not hard to see how The Great Rearranging over all industries will produce similar results.

Our only additional hope is that the influx of small businesses into what even now remains one of the most important, lucrative, and politically powerful of industries will give all small businesses a louder voice in the political process. A blogger's gotta dream.

Rep. Nydia Velázquez (D-N.Y.), who chairs the U.S. House Small Business Committee, has urged Karen G. Mills, the new head of the Small Business Administration, to implement ASAP those measures in the stimulus package--notably the $35,000 microloan program--designed to get credit flowing to small businesses again. It was supposed to have been initiated within a month of the stimulus's enactment; it has now been almost two since then. "With every day that goes by, viable small businesses are being forced to close," Velázquez said. "Without the lifeline that this program can provide to small businesses, our economic recovery will be slowed."

Well, yes and no. Obviously the SBA should move to implement whatever Congress has told it too as soon as possible (though it can hardly be blamed for missing the timetable, given that their leader was confirmed under two weeks ago). And, yes, credit isn't unimportant, even in the relatively debt-lite world of small business.

Still, credit is not the be-all and the end-all (and the microloan program in particular seems to us designed just as much to make sure banks get paid back as to make sure small businesses can survive and thrive). Last week, we urged Mills to help with credit, yes, but also to look beyond the world of credit at the myriad other ways she can steer federal policy in a small business-friendly direction. We forgot to mention that Congressional leaders with a particular interest in small businesses--so Velázquez, as well as Mary Landrieu, Olympia Snowe, and Chuck Schumer in the Senate--should do the same. Consider this our plea.

Skadden, Arps, Slate, Meagher & Flom LLP is, if not the single most profitable law firm, then among them. So from their perspective it makes sense for them to pay a rising associate in their banking division $80,000 to take a year off. They don't lose the attorney to a rival firm, which is what would happen in the event of a layoff or even, likely, a pay cut. But they also don't sink their normal salary plus overtime plus perks--which, annually, probably comes out to several times that 80k (which represents one-third of just her base pay)--into someone who, especially given the industry she works in, probably (and through no fault of her own) isn't going to produce the type of output that would justify the compensation to which she otherwise would be contractually obliged.

Now, your business isn't Skadden (well, unless it is, in which case: thanks for reading!), and you probably can't pay any of your employees $80,000, or even whatever one-third of their base pay is, to take the year off. However, there is a broader lesson to be gleaned that could apply to your business just as much as it applies to Skadden. You may need to cut payroll expenses in order to make ends meet, but that does not mean you shouldn't do everything in your power to hold on to your best talent. Does that mean offering shortened workweeks? Does that mean something more along the lines of the Skadden model, in which more generous time off is offered (or even compelled) at a discounted compensation rate? That's for you to decide, according to what best fits your business and its balance sheet. But now is very much the time to be flexible, as even the biggest law firm is showing us.

One thing we try to do is show how entrepreneurship fosters innovation and will actually help lift the United States out of the current troubles in which it finds itself mired and regain its spot atop the global economy. But damned if U.S. immigration laws aren't making that more difficult, as a New York Times piece on how strict U.S. immigration laws affect the tech industry showed.

Without the ingenuity and enterprise of numerous foreign-born engineers and thinkers, the tech industry as we know it simply wouldn't exist; we Americans are all incredibly better off for the fact that our country exerts a magnetism, a pull no other does and makes some of the most brilliant and talented people in the world want to live here, innovate here, do business here, and pay taxes here.

But onerous immigration and visa requirements--the type that forces Google (whose co-founder Sergey Brin was born in Russia, by the way), for example, to spend $4.5 million each year on visa administration--are limiting the extent to which the U.S. can take advantage of its magnetism and pull. The consequences of these regulations should be obvious: given how the homelands of many foreign-born tech superstars--China, India, Russia, South Korea, etc.--have developed over the past years and decades, now they are increasingly likely to stay at home and innovate in and for their own countries. And the U.S., which should be laying out the red carpet for them, is giving them one more reason to do just that.

It's insanity. And it's also, indelibly, a small-business and entrepreneurship issue (far more than it is merely a tech issue--the immigration restrictions affect life-sciences, communications, the arts and fashion, and indeed any other industry that would stand to benefit from the brilliance of foreign nationals). We're going to do our part to frame this as such. But we hope that prominent voices in the small-business community, whether they are lobbies or legislators or the head of the Small Business Administration, will speak up for a more open immigration and visa policy where idea-jobs are concerned. The future of small-business and entrepreneurship is at stake.

I’m something of a movie buff, and one of my favorites is the 1967 film Cool Hand Luke starring the late and legendary Paul Newman as Luke Jackson (that's him in the blue), a prisoner in a Southern chain gang. Luke’s nemesis is the Captain of Road Prison 36, played by the late Strother Martin, considered one of this country’s greatest character actors.

One of Martin’s lines as the captain, "What we've got here is (a) failure to communicate," has become so much a part of the culture that it's #11 on the American Film Institute's list of the top 100 movie quotations in American cinema.

So now let’s put that line in the context of not a chain gang but rather today’s business environment, in which the reality of layoffs is hitting home for an increasing number of small-business employees. The integrity of the employer in committing the layoff--or the lack of integrity--as perceived by the terminated employee can turn a simple business decision into a lawsuit.

Daniel P. Skarlicki, Laurie J. Barclay, and S. Douglas Pugh write about this phenomenon in their article, "When explanations for layoffs are not enough: Employer's integrity as a moderator of the relationship between informational justice and retaliation", in the March 2008 issue of the Journal of Occupational and Organizational Psychology published by the British Psychological Society.

"Victims of downsizing often perceive their layoff as being unfair, which can lead to various forms of retaliation," they write (they mean retaliation not in the sense of an employer's firing or harassing an employee unjustifiably, but in the sense of an employee taking some sort of action in response to being fired). To head off retaliation in the event of layoffs, they prescribe what they call "informational justice," in which the employer offers laid-off employees "adequate explanations in a timely manner".

Does the employers' offering of informational justice--the employer's "integrity"--have the desired effect of avoiding nasty lawsuits and the like following sad but necessary layoffs? The author say it does: "Results from a field and laboratory study suggest that informational justice helps manage retaliation only when layoff victims perceived that their employer had high (vs. low) integrity prior to the layoff. In Study 2, we found that perceived sincerity mediated the impact of informational justice by integrity interaction on retaliation."

Let me translate the academic jargon into practical small business management language. It’s simply this: the origins of retaliation, i.e., lawsuits, don't begin with the employee's termination, but much earlier in the employer's past behavior. Even if you provide "informational justice" in the event of the layoff itself, that only goes so far to preventing your ex-employee from retaliating. What really makes a difference is effective, consistent communication throughout their time working for you. It's not only the right thing to do, it’s also good management--and good risk management.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

Independent Street has the goods here.

Want our advice? Don't participate in this spectacle--certainly your desire to have your employees vote each other out of their livelihoods on national primetime TV doesn't exactly speak to your integrity.

Better yet, don't watch this vulgar, sordid trainwreck. Layoffs shouldn't be fodder for this sort of thing.

Remember Joe the Plumber? (Of course you remember Joe the Plumber.) We remember Joe the Plumber, mostly for making us write a post in which we pointed out that, however you felt about his political positions generally, he was disingenuous--at best--to claim that he was speaking in the interests of small-business owners in opposing then-candidate Barack Obama's plan to raise income taxes on those with over $250,000 in income, if only because most small businesses simply don't pull in that much per year. (Incidentally, only a couple of weeks ago Business Week did the reporting and confirmed this.)

Well it appears that some people--we are thinking of ten particular Democratic senators, and, especially, the National Federation of Independent Business--don't remember Joe the Plumber. The New York Times reports that those ten senators are opposing a continuation of the estate tax, supported by President Obama, that would levy 45% on estates over $3.5 million ($7 million for couples), instead getting behind an alternative that would lower the rate to 35% and tax only $5 million ($10 million for individuals) estates. Enacting the alternative would lower the estimated revenue from the tax by about $100 billion. What bothers us isn't the alternative itself; it's that the alternative is being sold by its main advocate, Sen. Blanche Lincoln (D-Ark.), as existing primarily to help out small business: "In a time when our government has handed out billions upon billions to failed Wall Street banks, it is time we provide a little relief to our businesses on Main Street," Lincoln said. And the NFIB is doing the same thing.

We're not here to take a position on the estate tax, which its opponents call the death tax (and which we call the estate tax, because just as the income tax taxes income, the estate tax taxes estates). And we're not here to debate appropriate rates or limits. We are here to call fouls on rhetoric that simply misrepresents reality. And rhetoric that casts a $3.5/$7 million lower limit on taxable estates as an affront to small businesses does just that.

The Times points to the nonpartisan Tax Policy Center's report on the subject, which indicates that only 100 small businesses and small farms would be affected by a continuation of the estate tax at current levels. That's 100 not per year, but total. In the whole country. At current levels. Adopt Lincoln's alternative, and the number drops to 40, including--wait for it--likely zero in Lincoln's home state of Arkansas. (It would, however, as some observers have noted, help members of Wal-Mart's Walton family, many of whom reside in the state. So much for "Main Street".)

The NFIB is similarly misleading. "The death tax creates a disincentive to expand a business, create jobs, and far too often, literally taxes family businesses right out of the family," the NFIB says. "It is important to note that much of the cost of the death tax occurs before the tax itself is levied. The threat of the tax actually forces small-business owners to pay for expensive estate planning if they want to keep their business in the family."

"Far too often" are the relevant weasel words. If you are against the estate tax as a matter of principle--an entirely legitimate position, on which reasonable people can and should differ--then of course any instance of its imposition is "far too often". But if what you're proposing is not elimination but a compromise, then 100 instances can't be considered "far too often". It's difficult, moreover, to see how it taxes the business "right out of the family". And as for "expensive estate planning": this is why it only applies to people with large estates. If you think that's still unfair, or if you think the tax should be more graduated, then fine--make the honest case as much. Alas, and far too typically for the NFIB, their position seems less a coherent and thoughtful advocacy for the interests of real small businesses and more a paint-by-numbers offering of Republican Party talking points.

What they don't propose, and what might actually make sense, are rules under which business assets are exempted from the estate tax in the event that they are instead immediately passed on to the property of a family member, so as to avoid levying the estate tax on what is the effective property of someone who hasn't died. We'd certainly be open to considering such a proposal, and it very clearly has to do with small businesses.

There is something of an urgency to these estate-tax deliberations: the tax is designed to start hitting estates worth as little as $1 million--a limit both sides appear to agree is too low--in 2011. If those ten Democratic senators just want the entire estate tax gone, then they need to say so. And if they believe that their alternative is so important as to justify holding up needed legislative action, then they should feel free to make the case. But leave the small businesses out of it. Ditto the NFIB. There are enough issues now that actually do have profound implications for millions of American mall businesses that this one simply shouldn't be their fight.

Even as President Obama's approval ratings across a wide swath of ideological/demographic groups remains impressive, one community remains relatively unconvinced: small business owners. A City Business Journals survey showed that almost three in five small business owners--really owners of small to medium-sized businesses--believe that Obama does not understand their needs, and over 40% said they are less optimistic about the economy than they were before Obama took office.

The main caveat is that this is a crowd that skews conservative: of those surveyed, nearly three times as many said they were Republicans as said they were Democrats. Remember, surveys of small-business owners showed them supporting Sen. John McCain over Obama.

Still, while it would be wrong for Obama to get despondent over this, it would also be wrong for him to ignore it altogether. The question need not be of altering policy, but rather of framing. We'd like to see him discuss his plans for health care, for instance, not just as about insuring all Americans (an important goal, to be sure) but as helping small businesses insure their employees, for example. We'd also like to see him present his plans for jump-starting the economy through the small-business lens. If he does these things, we wouldn't be surprised to find his approval among small-business owners fall more closely in with his approval among everyone else.

So says the Treasury Department. The 21 surveyed banks together received $211 billion under TARP. Business lending was down 24%.

It's partly a question of demand, of course. And the banks naturally claim that they would have made even fewer loans without the federal (that is, taxpayer) money.

Still, it's difficult to think TARP was truly the best way to go if this is how the money was (not) spent. And anyway, some of these banks--JPMorgan Chase and Goldman Sachs among them--are the same ones that have posted billions in quarterly profits in the past few days. Where are small businesses' quarterly profits coming in?

We know that unpaid debts are at the heart of the current Great Recession, and we know that the consequences of these unpaid debts will unfold over many years. One and a half million Americans are expected to declare bankruptcy in 2009, many of them small business owners, following approximately one million bankruptcies in 2008.

Many of us hope for swift justice to be done to those who caused so much financial misery. But even the most punitive-minded among us, thankfully, do not look to mete out punishment the way it used to be done: debtos' prison.

Jill Lepore recently published the most interesting historical perspective on our current problem I’ve read, in the New Yorker. America, it seems, was fundamentally built on the idea of protecting the indebted and bankrupt.

Every small business owner borrowing money should read the article in full, and count her lucky stars that a business stumble, honestly come upon, will not land her in the clink.

For those who want the Cliff’s Notes on the Lepore article, some highlights:

-Just following the American Revolution almost 70% of the 1,162 debtors in New York City debtors' prison owed less than a pound sterling, a tiny amount. Bankruptcy laws did not exist, so debtors spent years in prison until their creditors decided to release them, or not.

-New Yorkers could be imprisoned for debts until 1830.

-The right to declare bankruptcy used to be restricted to businesses in the act of “trading,” while all other businesses could never discharge their debts. (Is it just me, or doesn’t it seem like the trading firms are still getting a special deal from the government?)

-Many writers ended up in debtors' prison in the 18th and 19th centuries, and, not coincidentally, many plots of popular novels of those times centered on debt problems. Dickens and Trollope come to mind. The former’s father went to debtor’s prison, the latter’s father fled England to avoid it.

-The colony of Georgia was founded as a safe-haven for debtors released from English prisons. Is that why Georgia has the most bank failures of any state in 2008 and 2009? Are they reliving their history?

-Founding Fathers Washington and Jefferson owed huge sums to merchants in London, leading many historians to argue that the American Revolution was inspired largely by the notion of debt relief.

As much as my small business has been hurt in the Great Recession by customers who do not pay their bills, the article made me grateful. Unpaid debts are terrible, but we have a way to deal with them more humane than prison.

We love cloud computing. We think it is a phenomenal way for smaller businesses to cut back on costs and level the playing field as they compete with larger corporations, for whom cloud computing tends to be more costly, less practical, or both.

Indeed, the emphasis is on more costly as we look at a new report on cloud computing from consulting powerhouse McKinsey & Co. (the occupational alma mater of new Small Business Administration head Karen G. Mills). Because precisely what the report finds is that cloud computing is more costly than is generally thought...for large companies. But there is a flip-side to this news. In the report's words (page 20, for those who've downloaded): "Cloud offerings are currently most attractive for small and medium-sized enterprises...and most customers of clouds are small businesses." You can take a look at the graph to see why.

Now, in case you were wondering, it is likely that cloud computing will get less cheap for large corporations too; or so, anyway, argues TechCrunch (which is how we found the report in the first place, incidentally). TechCrunch argues that innovation will lead to increased competition, which in turn will lead to price-cutting.

Still, however much innovation and price-cutting here will help large corporations, it's hard to conceive of how they wouldn't also help small ones. And it's also hard to conceive how cloud computing hasn't made it ten or one-hundred times easier to start your own business from scratch. Which is why we will continue to sing its praises as long as our fingers have the strength to type.

We've taken significant issue with several of the government's proposals for helping small businesses: chiefly, we feel that focusing on credit is the wrong way to go. But--sheesh!--surely everyone can agree that, in the absence of the Obama administration and both Houses of Congress dropping everything and listening to our advice, at the very least the enacted policies should be implemented according to their stated schedules? Right?

Well, unfortunately, as far as the administration's small-business policies are concerned that ship has largely sailed. Although this is not as big a deal as you might think.

As Fortune reports today, a Government Accountability Office survey found that numerous newly-enacted small-business programs not only don't exist yet, but in not existing are behind schedule. The emergency microloan program? A month-and-a-half overdue, and nowhere in sight. The $15 billion from TARP to buy loans on the secondary market? Those purchases are not expected to begin until June, a.k.a. three months late. (Of course, they still have some kinks to work out there, like the plan's being semi-dead.)

The good news is that the Small Business Administration has already implemented two new regulations deriving from the stimulus: it has already begun waiving fees for utilizing its lending programs, and it has already started guaranteeing SBA-backed loans up to 90%. Those steps, while not remotely what we think will be adequate, do strike us as more important than, say, the microloan program, which always seemed to us to be just as much a sop to lenders--read: the big banks--as to small businesses (incidentally, the program s expected to be up-and-running within "weeks, not months").

The other main caveat is, of course, that all of this is moving extraordinarily fast, and it would be even if all agencies concerned--the SBA, the Federal Reserve, the Treasury Department--weren't also involved in, y'know, a few other things at the moment as well. Plus let's remember that the SBA only received a permanent Administrator two weeks ago. And let's remember that one thing the stimulus did was to give the SBA more money for administration, for hiring, and especially for technological upgrades, because everyone knew that the agency, woefully underfunded and overlooked during the Bush administration, was ill-equipped to handle all of these massive obligations through no significant fault of its own (and through even less fault of the people who are just starting their jobs now).

We would be bad at the blogging business if we didn't sit here nipping at the government's heels to move faster. And they should move faster! Schedules exist for a reason! That said, we're not ready to get out the firing squad just yet.

To us, anyway, this is the first weekend that truly feels like spring. So we hope you spend most of it outdoors. That said, should you need something to do during your precious indoor moments...

Laid-off mentors. The New York City government has initiated JumpStart NYC, which pairs fired financial types to consult with small businesses. And it's free! [NYT]

Stimulus ---> Innovation? The government's massive new spending spree could be the spur to the creation of brand-new technologies and even industries. [Entrepreneur.com]

Small-business deals! Big-box retailers, including Sam's Club, Costco, and BJ's Wholesale Clubhouse, want your business, and they have been in cutting prices in order to get it. [Independent Street]

This one's optimistic. Actually, the National Federation of Independent Business's monthly optimism index continues to hit near all-time lows. But this month, there actually may be cause for hope, a.k.a. optimism. [Small Business Trends]

Self-defense. How to guard against data theft, particularly from current and former employees. [bMighty]

Selling out in down times. You probably won't get for your business what you would during a booming economy. That said, if you're retiring or just want to opt out, and if you're okay with your business selling for under $10 million, you can probably find yourself a buyer. [Fortune]

What better way to start the beginning of your week with...a story about funerals! But actually there is much to glean from the New York Times's report on the death industry, which, even in this economy, will likely grow this year. Any type of business that's doing that, we'd say, is a business worth emulating.

Of course, there is one aspect of the funeral industry that most small business owners (well, except those whose small businesses are funeral parlors and the like) cannot replicate: its heroically inelastic demand. Fact is, even though people may be cutting back now, they are still going to honor their recently-deceased beloved with funerals. And, it goes without saying, the stream of the recently-deceased will never abate.

But the funeral industry is not just the proverbial bucket-holder in a rainstorm. Its secret, according to the Times, has been "A growing willingness to cater to individual tastes." Perhaps the most memorable example is the motorcycle lover who had his hearse towed by a Harley-Davidson. Well, and also the urn pictured.

In fact, the story is a bit more complicated. The rise of secular services as well as cremations (which tend to be half as cheap as non-cremation funerals), plus Americans' increased mobility are posing something of a threat to the long-term status quo and growth of the industry. Then again, in an example of what one person refers to as funeral directors' being "early adapters," when cremations started to become more prevalent, many funeral homes figured out they could still rent out coffins for a one-day viewing. In one stroke, they created a way to make more money and to transform the phrase "rented coffin" from an oxymoron into reality.

So how does this apply to you? The lesson is obvious: adapt--adapt to the times, adapt to new technologies and trends, but above all adapt to your customers' desires, which is what all other adaptions are ultimately about anyway. The good news is that, if they are diligent and flexible and good listeners, small businesses are nearly always going to be better at adapting to shifting consumer demand than large corporations are: it is in their nature to have their ears closer to the ground and to be more ready and able to change accordingly. You may not have the funeral industry's enviable demand, but there's no reason you can't share its laudable business wisdom.

Has the small-business credit market began to thaw? A key metric to watch is the rate at which lenders are able to sell off small-business loans on the secondary market, because banks' ability to do this would in turn free them up to make more loans (and provide them an incentive to do so as well), so the measurement is something of both symptom and cause of looser credit. In fact, the vast majority, in terms of money anyway, of the Obama administration's plans to increase the flow of credit to small businesses is to take $15 billion from the (in)famous TARP fund and use it to buy loans on the secondary market. So you know it's important.

So all concerned should find it heartening--if only somewhat; more on that in a second--that, according to the General Accounting Office (as reported by The New Entrepreneur), the volume of Small Business Administration-backed loans (which is only one type of small-business loan, to be sure) purchased on the secondary market jumped more than 60%, to over $135 million, just from January to February 2009. Perhaps more significantly, that figure is the highest since September 2008--when, as you'll recall, Lehman Brothers crashed and so did everything else financial.

So good news. Except also, in a certain way, troubling. Because, as The New Entrepreneur also notes, this rise predates not only the beginning of the use of the $15 billion to buy secondary loans--that still hasn't started, and likely won't start before June--but it even predates its announcement.

What this means is that the rate of small-business loans purchased on the secondary market has at least began to increase dramatically without any help from the federal government at all; which in turn suggests that the future help might not be necessary, and might indeed constitute a waste of $15 billion of the taxpayers' money. (A caveat: even though February's $135 million number was the best in half a year, it did not come close to approaching the 2007 average of over $300 million per month. Although given how overleveraged everyone was in 2007, maybe that's not such a bad thing.)

We have been pretty tentative over the $15 billion plan simply on the grounds that we don't think credit is the main problem that small businesses are facing right now, and therefore that money can best be spent in other ways that involve juicing small-business demand and consumer spending generally. But we at least thought that the plan would prove effective at increasing credit, or at least increasing the availability of credit (never forget that part of the reason small-business loans are down is because, during tough times, small businesses are less likely to go into debt in order to expand or things like that).

Now we're not so sure even of that. We're starting to hope that the Obama administration rethinks its approach to its laudable goal of helping out small businesses the way they've been helping out big ones--before it's too late and that $15 billion has been spent.

Marc Tracy, my guiding light (editorially speaking), wrote a post recently, "The Great Rearranging Hits Wall Street". He discussed the essential disappearance of the investment banking industry, and as a result, the “great rearranging" of the financial services industry, in which savvy entrepreneurs and smaller banks stand to gain.

Well, there’s another great rearranging going on, and it’s in “Big Law”. That’s the colloquial expression given to the 250 largest American law firms, with about 15 of them having more than 1000 lawyers. Or used to. Lawyers haven’t been immune from what’s been going on in the economy, and Big Law is attempting to adjust in a number of ways--ways that, again, look primed to benefit small business.

Marc touched on that also when he recently wrote about Skadden, Arps, Slate, Meagher & Flom LLP, among the biggest of the Big Laws, "Telling Employees To Take A Hike--For A Year". Skadden is offering to pay rising associates in the firm $80,000 to take a year off so that the firm doesn’t lose them to a rival law firm, which would be likely to happen even if they had to take a pay cut, but at the same time can save money by not paying overtime and perks.

But that’s just one way Big Law is reacting. The ABA Journal reports that for the first quarter of the year approximately 7,000 attorneys and staff have lost their jobs in addtion to cancelled summer programs, postponed first-year associate start-dates, and pay cuts across the board including partners. Not a pretty picture for the 43,000 imminent law-school graduates about to enter the legal job market.

Marc has pointed out on numerous occasions that recessions can actually prove a boon to innovation and to small businesses. And such is the case for the legal business.

We’re seeing stories about some of those graduating law students, "Unable to Find Jobs, Law Grads Hang Out a Shingle". And stories about "Wall Street Lawyers Dumped for Lower-Priced Boutiques". (A “boutique law firm” is a law firm of about 50 or less attorneys that specialize in only a few areas of the law). And even for the “larger” small firm (those with less than 300 lawyers), Larry Bodene on his Law Marketing Blog reports, "Big Corporations Hiring Smaller Law Firms".

So what does all of this mean for us small business owners? I can’t say it better than Seth Godin did in his brilliant blogpost, "Small is the New Big", which the recent recession seems, if anything, to have made only more right-on and prescient. And if all this seems pretty obvious to you, Seth wrote this in June, 2005.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

If marketing is the art of identifying and then enticing the most enviable customers for your product, it is looking increasingly like for all sorts of products the most enviable customer are people born before some year whose third digit is at least a 6, if not a 5. The middle-aged and up, in other words, might be whom you should increasingly be focusing your marketing dollars and effort on.

Such, anyway, was the conclusion of this New York Times article, which reports that the famed 18-to-49 demographic is giving way to the 50-and-over one. There are two main reasons. One: the recession has put extra pressure on the indebted to cut spending, and people who have been around (or, more precisely, who have been independent adults longer) are more likely to have paid off student loans and mortgages--they have, as one person in the article put it, "assets, not allowances". Two: there are simply a ton of 50-and-overs right now historically as compared with younger generations. For this, as for so much else, you can thank the Baby Boomers.

In fact, the younger edge of this older demographic--which is to say, the Boomers--appear to represent something of a marketing sweet-spot. They have the wealth and clean balance sheets of...less-extremely-young folks*, but the inclinations, hipness, and even tech-savvy of those 18-to-49ers. As one ad man put it, “I’m old enough to have experienced TV without remote controls, cable and commercial clutter, but my mindset and consumption patterns are very different from my parents’ at the same age.” (We'd say this is about as prototypical--some might say cliched--a Boomer statement as you can find.)

So what does this mean for you? It means that even if you sell a product that would traditionally be thought of a young person's game, it might be worth taking a look at those slightly more advanced than your typical consumer--or at your typical consumer's parents--in crafting your marketing strategy.

*We're trying to be nice with the age-related language, as some of us have parents who are in this demographic (at the much younger edge of it, to be sure!).

In my first column, I noted that in my law practice representing business owners and my experience running businesses, it seems that entrepreneurs tend to lament, or feel sorrow or regret for, the following:

o Focus. Pursuing new ideas to the detriment of the core business.
o Work/Life. Missing out on real life while pursuing business passion.
o Employees. Inability to find great help and keep them.
o Partners. Challenges in finding or maintaining good business partners.
o Money. Inability to find necessary financing for growth or survival.
o Burnout. When one morning you just can’t do it anymore.
o Boredom. When there’s not much more to build.

We talked about burnout in the last column. In this, the last of this series, we cover what happens when interest level in the business wanes. This is different from burnout, which occurs from simple exhaustion. Here, you may not be tired, but the business may have gotten to a point where your focus goes elsewhere. This is also different from the focus issue described earlier. Here we are talking about simple lack of interest even where a new idea may exist.

The most common cause of boredom is when a business grows to where it becomes harder to consider it “entrepreneurial.” More bureaucracy and formality creep in, multiple layers of management lead to way too many committees, meetings, and the like. This can be unbearable for the entrepreneur who is used to simply diving into something new. Often MEGO (my eyes glaze over) sets in as the founder sits in meetings listening to well-intentioned employees drone on about concerns and risks associated with whatever the issue is.

My moment actually came recently when my law firm had hit over 30 people and we had to prepare our first employee handbook. It is true we needed it. But the multiple rounds of drafting, and the one colleague who would not sign the acknowledgement because she was reviewing it with her lawyer, made me realize this was the very type of “bigger company” event that caused me to pass the Managing Partner role in my firm on tto another partner, leaving me as “Founding Partner,” to be bothered only for truly major decisions.

So what should you do when you become bored? Some of the solutions are similar to those for burnout. For example, you can choose to sell the business, or put someone else in charge while you pursue something else.

But are you sure you will be able to avoid worrying about everything and micromanaging? In my case I admit I am not sure.

How do entrepreneurs who start something small and keep building to millions or even billions of dollars avoid the boredom that follows the business's institutionalization? These entrepreneurs fit one of two categories. Some love the excitement of “the deal,” like Sanford (Sandy) Weill, former head of Citigroup. What got him excited every morning was the next big acquisition. These types, which I believe also would include media mogul Rupert Murdoch, are also driven by the “size matters” school of success, and what drives them is the need to constantly make the enterprise larger. They particularly enjoy the ego boost of being in charge of such a large and prominent enterprise.

There are others, like Bill Gates of Microsoft, who appear to have a visceral need to control everything around them. If Bill cannot acquire it, he wants to control it some other way. If he cannot control it, he needs to try to crush it. I think to this day it drives him nuts that, even though Microsoft is vastly larger than Apple, he was not able to make the Cupertino company go away. Controversial media personality Howard Stern says, basically, I cannot rest until every single radio listener tunes in to me and no one else. This extreme competitiveness allows these moguls to rise past the boredom phase and leave day-to-day matters to others while they search for the next thing in their way to be taken or destroyed.

As this series has been all about regrets, I would like to end on a positive note. I think most entrepreneurs believe that dealing with all the challenges and laments in their way are almost always worth it in order to have the freedom to pursue business opportunities unfettered by infrastructure, bosses, and in many cases even partners. It’s as much about the joy of that freedom as it is about the ambition for financial success. I have many regrets, in the sense that there are certainly things I would have done differently in my various entrepreneurial endeavors. But I have no regret about choosing the path I did, and I think almost all entrepreneurs will tell you the same, gray hair notwithstanding.

Look for a new series focusing on entrepreneurship next….

David N. Feldman, founding partner of Feldman Weinstein & Smith, is the author of Reverse Mergers and blogs at crisispoint.com and Reverse Merger & SPAC Blog. He can be reached at dfeldman@fwsllp.com.

When last we visited the Obama administration's plan to use $15 billion from the TARP fund to buy up small-business loans in an effort to loosen the small-business credit market, well, the plan looked somewhat screwed. The problem? Congress appropriated the TARP money with the proviso that companies who took it are subject to several conditions, such as limits on executive compensation, and the executives at the companies that own most small-business loans (which tend to be made by banks and then sold to these middlemen) are planning to refuse the TARP money so as to avoid those conditions, which potentially include any conditions that Congress imposes in the future. Ooops. Word is that the administration may set up a special purchasing vehicle to bypass pesky Congress and its pesky laws. Meantime, that plan sits in some sort of purgatory (fortunately--or, really, unfortunately--implementation of the plan is severely behind schedule, so the administration has some time to figure this all out).

Meanwhile, the $15 billion was supposed to be in addition to, and in many ways an extension of, the Term Asset-Backed Securities Loan Facility (TALF), a Federal Reserve initiative in which anywhere from $200 billion to $1 trillion will be used to buy up credit-card, auto, student, and, yes, small-business loans in an effort to juice lending. However--oops again!--a new report from the Treasury Department's Office of General Counsel is saying that TALF, too, is subject to executive compensation restrictions and the like. If the holders of these other loans do as the holders of small-business loans did and reject government cash and instead hold onto the loans so as to maintain their current compensation levels, then this bailout initiative, too, would seem to be in jeopardy.

It's worth mentioning that the private financial companies that are choosing or may choose to reject the strings-attached funds are not acting stupidly or greedily. Holding onto the loans may be somewhat risky--many could default--but also potentially lucrative, as the ones not in default will keep paying interest, and eventually, if/when the economy improves, they could still very plausibly be sold at a profit. So it's already a legitimate decision for them to make. Add several known and potential unknown conditions to the mix, and it's not difficult to see why they'd reject the money.

But in the meantime, the administration is unable to follwo through with its plans to get credit flowing again, including to small businesses. It's about time we start hearing some Plan Bs from the guys in charge.

After we read that venture capitalists, angel investors, and the like want the federal government to give venture-backed businesses the ability to tap small business-specific seed-money funds, tax credits, R&D dollars, and even loans (presumably the Small Business Administration's 7(a) program?), our first instinct was to check Lloyd Chapman's stomping grounds at his American Small Business League and the Huffington Post to see if he'd responded with a furious denunciation of venture capital's nefarious lobbying efforts. Surprisingly, he has not--yet (nor is he quoted in the article). But we won't be shocked if we see an angry retort from him in the coming days. The prospect of venture capital-backed companies taking money away from other small businesses is practically designed to push his buttons.

The piece does quote small-business advocates saying what we suspect Chapman would: that expanding these programs to equity-backed companies would, in the article's words, "divert attention from those that really need help." And it does mention a tense dynamic that Chapman has not been shy about raising: the fact that Obama's pick to head the SBA, Karen G. Mills, who was confirmed at the beginning of the month, has a background in venture capital.

In fact, we can almost picture Chapman's veins bulging upon reading the quote the article gets from an SBA spokesperson: "I think certainly [Mills is] going to look and make sure the SBA is working as effectively as possible to help small businesses, and that includes high-impact small businesses," he told the Journal, using what appears to be a euphemism for equity-backed small companies.

We're going to be more open-minded on this one than Chapman would be (it is Chapman's job to be closed-minded when it comes to this sort of thing). We wouldn't necessarily be averse to governmental aid for venture-backed small businesses; every other industry is getting a bailout, so why shouldn't they, too? However, any such efforts need to happen in a way that does not deny small, non-equity-backed businesses one cent of money they should get. Should any proposal mess with that, we will join Chapman in his inevitable crusade against it.

This strikes us as good news. There is a move being led by close White House ally Sen. Claire McCaskill (D-Mo.) to give federal departmental inspectors general more power to investigate contracting practices. Their main focuses would likely have to do with the use of foreign contractors and the general rapid growth in contracting (it reached over $500 billion last year). But one would think that increasing these inspectors' general power, as well as the existence of McCaskill's new oversight Senate subcommittee, might increase the odds that federal procurement aligns with the legal requirement that 23% of all contracts in each department go to small businesses, instead of, you know, not.

In honor of Earth Day, we thought we'd highlight this story on New York City businesses that use wind-generated power. These are not just big businesses like the Chelsea Piers sports complex, either. A small SoHo salon, for example, is mentioned as one wind customer. Another is Barcade, a bar in Williamsburg, Brooklyn famous for its ample beer selection and its '80s arcade games (in fact, the establishment is a BizBox favorite). “We have a big electricity footprint with the video games, and felt we needed to be a little more responsible with our energy use," a co-owner says.

There's no denying that wind power is a little bit more expensive than more typical sources--it can cost as much as 2.5 cents per kilowatt hour more, according to the article. But it is not so expensive as to put these small companies out of business. And when the New York Times mentions you as an environmentally responsible business, then wind power becomes a marketing investment. Indeed, the salon actively advertises the fact that it uses green power. So on this Earth Day, consider this one more reminder that doing good and being a responsible corporate citizen can also be profitable. Win-win!

Let's see if I understand this. The banks and investment houses violate Federal Regulation H, which governs safety and soundness in real-estate lending. Over a period of ten years, they issue trillions of dollars in sub-prime loans. They then sell these loans to Fannie Mae and Freddie Mac, and in the process, make a huge profit and basically absolve themselves of all risk associated with these loans. Then, because there is an implied guarantee by our government on these mortgage-backed securities, they buy them back from Fannie Mae and Freddie Mac to hold in their capital accounts. When the entire thing starts to unravel, the government steps in and stands behind the implied guarantee bolstering the world's confidence in our markets (had they not done this, every bank, even the best of them, would have been insolvent).

When more needs to be done, in other words, our government commits our tax dollars and those of future generations to bolstering these financial companies by providing TARP money, in exchange for preferred shares in these companies, which may in fact soon be converted into equity. These two moves revitalize the financial markets; and, if we're lucky, we should see some return on our investment in the future.

However, the government foolishly fails to put reasonable restrictions and implicit directions on how TARP funds can be used, so lending--to small businesses, for example--fails to pick up. Some of the greedier companies fail to do their part by controlling reasonable costs such as executive compensation and dividend payments. Our government steps in to protect our investment and changes the terms of the TARP contract, adding these restrictions, which in turn jeopardize efforts to use the funds to, among other things, help out small businesses.

The financial companies cry foul play. Well surprise, you greedy bums. Take a look at this piece of precedent from a 1992 decision in the U.S. Court of Appeals for the Fourth Circuit. (Trust me, it's important.)

Now pay special attention, my friends, to Section III-B. If my interpretation is correct, a sovereign (that would be the U.S. government) can nullify a contract by change in legislation. Basically that makes no government contract binding to any other party. The power lies in our hands.

To our leaders, I say: let's let our bet ride for a little while longer and see if we can't get a return on our investment. Why let the financial companies have our money when they are failing and then take it back when their new-found profitability comes from our investment? Moreover, since it appears that we, the people, through our government, now have some power over how the funds are to be used, you might want to consider imposing some Small Business Lending on these same banks that are holding our funds.

Anonymous Banker is a 35-year veteran of the banking industry who has spent much time as small-business banker and credit underwriter. He blogs at anonymousbanker.com.

It is an old saw--and a true one!--that, in down times, an effective marketing and pricing strategy is to discount, as well as to offer creative, eye-catching promotions that also save the customer money. Call it recession marketing (we do!).

While we certainly stand by that, it appears there may be limits to it. The main limit being that while discount is good, free is bad. So, anyway, says the New York Times, reporting on an academic study soon to be printed in the Journal of Consumer Research. The study found that offering a "freebie" hurts not only the free product's perceived the value, but the perceived value of the product you're actually trying to sell. (We here define "freebie" as a product that is automatically included, free, with the purchase of a related product, or a second unit of purchased product--the ploy known as BOGO, or Buy One Get One.) So think twice before offering two-for-the-price-of one.

Meanwhile, and we think along similar lines, the Washington Post's Economy Watch blog brought news of a new development at McDonald's: the introduction of a $4 burger (remember, that's expensive for Mickey D's!), a 1/3-pounder. At first glance, this gambit seems strange: McDonald's, which has the biggest and maybe the best reputation of any fast-food chain--and which, in recent recession-filled months, has accordingly seen enviable revenue growth--is introducing a more expensive premium menu item? It would seem to cut against the times, as well as against its own grain.

But guess again. In fairness, part of the reason for the upgrade is that the chain has steadily juiced up other types of offerings in recent years, but hadn't done so with its burger yet, even as competitors have (Burger King already offers a 1/3-pounder). More intriguingly, though, during the recession there may actually be a market, if not for premiums, than for premiums-among-discounts: as the National Restaurant Association's VP for Research explained, in the blog's words, "In recessions, higher-income families that never would have gone to a quick-service restaurant such as McDonalds's are attracted to premium-priced products." As McDonald's welcomes new, and wealthier, clientele, the Angus may seem like the perfect fit for them.

Ingenius? Or too clever by half? Frankly, we're leaning towards the former. It really does make a lot of sense. We think that these two marketing developments show that, while discounting during a recession is a good thing, it is the type of good thing there can be too much of.

"The economy has worked in my favor a little bit, because a lot of wholesalers in the past didn't want to work with someone as small as me. They had huge minimums--you had to order, let's say, $5000 of merchandise. There are very few companies left that are insisting on that sort of thing. And in fact, they're so happy to have orders that you can order whatever you want."

Our guest today is Cindy Caplan, the owner of The Art of Giving, a one-person business in Bethesda, Maryland that specializes in innovative, unique, and personalized gifts. Cindy discusses how the business works, the pluses of having your store be in your home, and the ways in which a struggling economy may have actually helped her business.

If you are a small business owner interested in being interviewed for Small Business Salon, or know one who would be (or should be!), please email us at bizboxonslate@gmail.com.

BizBox: Please tell us about your business.
Cindy: The name of my business is The Art of Giving. It is a gift business that I started a few years ago. I started it by doing custom gifts for special occasions. So if somebody wanted a really special 50th birthday present, and the person they were buying for was a TV addict, we did a TV-themed gift. For whatever reason, I just have this knack for finding things that are unusual and fun and special. It was important to me to find gifts that nobody else would find and that were really unique to the person we were giving it to. And the presentation is really important to me, the way it was wrapped and presented is something I was really concentrating on as well.

So I started off doing that. And I thought that's what I'd continue to do. And then as time went along I started going to the wholesale gift shows--New York, California, Atlanta. I started seeing a lot of really fun things that I felt people would love and that I hadn't seen in gift stores in the area. I started buying that stuff, experimenting, seeing if that's something people were interested in. In fact, people really liked coming over to my house, because they knew they could find things that were nowhere else. (I work out of my house.) And the business just kind of morphed from this tiny litle idea of custom gifts once in a while to really a full-time business.

I started off in a small extra bedroom in the house. And just two weeks ago I moved and pretty much took over our whole lower level. Now people call me for an appointment, they come over, and I carry everything from $10 gifts to priceless ones (but actually very expensive!). And I put together gifts too--I still do that piece of it.

What gives you this "knack" for picking out the right gift?
I think it's just persistence. Also, I could've never done this business without the Internet. I'm not sure how I would ever have done the research that I do. About a year ago, I did a 60th birthday gift for a lawyer, but he's also a volunteer fireman. And the person I was doing the gift for wanted to do a fireman theme. So we decided that it would be really fun to find some antique fireman helmets or books or whatever--what was out there was the initial question. 20 years ago, how would I have ever found fireman memorabilia? Maybe a publication I could've looked up. Now, in a matter of hours I had a whole list of things that were available. And I guess the bottom line is: most people don't like to do that kind of research. They find it boring, or uninteresting, or they don't have the time for it. For me, that's the prize--"I found it! I found an antique gorgeous fireman helmet!" I'm convinced that if I'm looking for it, it's out somewhere--and that's always been true.

How has working out of your home gone for you?
I like working from home. It gives me a lot of flexibillity. I don't want a storefront. I want to have the flexibility to work when I want to work, and travel or have other outside interests, and not feel that I have to be in a store from 10 to 5. Also, a lot of my clients work full-time, and they want to come over in the evening. I want to be able to do that and provide them with that service.

A lot of women feel a lot more comfortable walking out of a house with a white shopping bag than walking out of Saks with a Saks shopping bag. People come over here, no one sees they're shopping, they're parked in my driveway. The service they receive from me is everything from start to finish. So they have a beautifully wrapped gift with a card. Or I send it, I deliver it, and they don't have to worry about it.

How do you market your business?
It's all word-of-mouth. I started off by just telling friends about what I was doing. And really one thing led to another. Someone would receive one of my gifts, they would call, come over, see what I have. And that's really what has happened. In the last couple of months, I started sending out a couple of group emails to my mailing list. But aside from that, I've done nothing.

How has the economy affected business?
Even with the economy the way it is, people are still going to give gifts--for weddings, for graduations, for special birthdays. And when they really want value, that's where I come in to play.

I guess the economy has worked in my favor a little bit, because a lot of wholesalers in the past didn't want to work with someone as small as me. They had huge minimums--you had to order, let's say, $5000 of merchandise. There are very few companies left that are insisting on that sort of thing. And in fact, they're so happy to have orders that you can order whatever you want.

I think I've found a real niche. People are being more cautious about what they're spending. If someone's going to spend $50 on a gift in this economy, they don't want to give something they've always given. I can provide something new and unique, whereas Nordstrom's can't. So I haven't felt the pinch as much.

Please walk us through a typical experience for a customer.
It's set up as a little store. Somebody calls me for an appointment. I generally just do one-on-one: a lot of my merchandise is not self-explanatory. For example, one woman does custom pottery. She'll do a platter with a couple names and the date they're getting married, and I just have samples. It is not clear when you look at it what it is, and I really need to spend time with someone. I just walk them around. I have things divided up in little areas. I have women's gifts. Men's gifts. Baby gifts. Houseware. A lot of people show up with a list of things they're looking for--very rarely do people just come over to see what I have. And usually they buy way more than they think they need. They buy other gifts while they're here. Honestly, once I have someone over here, they've never walked out without something.

There's a flip-side: I think some people won't come over because they feel like they have to buy something. I want people to come see what I have and then know what I have when they do need a gift. But people's nature is, if you're gonna bother somebody and take their time and go over to their house, you need to buy something. And I try to head that off by saying when they first walk in, "There is absolutely no pressure." But it always seems to work out that they buy something.

What do you like about being in business for yourself?
It's really the specific business. I love what I do. And I think that when you love what you do and you're passionate about what you do, then you do a great job. I never dread anything about my business. I love the flexibility, the creativity, I love that I get to be with other people all the time. It's just terrific. I'm doing something that I truly love doing.

Check out our previous Small Business Salons.

Anyone with a birthday this weekend (happy birthday mom!) can take a break from their weekly readings. For the rest of you...

Chill out. How to deal with recession-induced stress. [NYT]

Teamwork! How to get your employees working together. [Entrepreneur.com]

Diversify! Small businesses' best bet right now is to broaden their customer base. [Wall Street Journal]

iEntrepreneurs. Apple targets small business owners in its new iPhone ad. [Independent Street]

On the couch. A psychoanalyst tells you how to make partnerships work. [Fortune]

"Glimmers of hope" Several new survey results point to moderate cause for optimism. [SBA Office of Advocacy]

Few things in life are more thrilling than starting your own business venture, but we know just how overwhelming launching can be. Many--including many women--put off launching because the task seems daunting and complicated. Before you get lost in the minutiae of business planning, forms, and financial spreadsheets, take a look at this simple list: Ten Things You Should Know Before You Launch. Answering these questions will help you to lay the foundation necessary to move you one step closer to making your dream business a reality.

#1: Know thyself. Many entrepreneurs launch before they take the time to articulate what they really want from the future they’re about to build. Ask yourself a few questions before you launch. What am I passionate about? How will this business help me fulfill that passion? Am I committed enough to stay the course? For how long? What are my, strengths, gifts, and talents? What do I enjoy doing? Don’t forget to identify your weaknesses too--knowing your strengths is fantastic, but knowing your limitations is vital.

#2: Know what you want. Get specific! This is your life we are talking about, not just a product or service. So take the time to identify how you want to spend your valuable time and energy. What does your average day look like? What hours will you work? Whom do you want to work with (are they hip and young, well-educated, dynamic self-starters, etc.)? Who are your customers or clients?

Define your main objective. What will your accomplished dream provide once it is in motion--are you in it for the money or for a flexible working schedule, or for pursuing the financial gains of a hobby, or for fulfilling a deep passion?

#3: Know your industry. One of the biggest mistakes start-ups make is not doing their research or ignoring red flags in the market. Do your homework and research your industry, making sure to include the following key items:

1) Has there been any recent growth in the market? If so, why? Is this growth on the rise, or has it peaked and is about to decline?

2) Have consumer tastes changed relative to your product or service? Has there been a recent shift in the way people live that has created a need for your business?

3) Have consumer sentiments or perceptions about your particular product or service changed?

#4: Know how to identify a trend or opportunity. Have there been any recent trends or developments that make entering the marketplace ideal (or not ideal)? Take a look at any opportunities created by consumers as well. For example, the “green” trend--as a retailer, offering these “green” products to your customers may enhance or distinguish your position in the market.

#5: Know your competition. When trying to figure out who your competitors are, don’t just go for the obvious. If you want to open a candy store, your competition is anyone who takes money from a consumer hoping to satisfy a sweet tooth, not just other candy stores. Once you start thinking in these terms, your potential consumer population will grow.

#6: Know your place. Where do you belong? Start thinking about what it is that you are offering. Is it unique? Does it fill or create a need that is not currently being met in the marketplace? Are consumers happy with what the competition is offering and how they are offering it?

#7: Know your audience. The goal here is to separate the group most likely to be interested in your product or service from the entire group of people who might be interested in your product. Once you know exactly whom you are selling to, you can more efficiently allocate your resources, time, and money.

#8: Know your objectives. There is no shortage of good ideas out there: it’s successfully implementing that can make you exceptional. Every good strategy addresses the five P’s plus: product, positioning, pricing, promotion, and placement—and the plus, by the way, is for customer service.

Product Your product can be a physical item, a service, or an idea.

Positioning How do customers view your product or service in the marketplace? How is your product or service different from the competition's?

Pricing What will you charge customers for your products and services? If you plan to charge more than the competition, what additional selling points or features will you add to make it worth choosing your product/service over the competition's?

Promotion How will you promote your business and create awareness in the marketplace?

Placement Where do you intend to distribute your goods or service? Is location important to the success of the business? Does your location need to convey a certain image, such as a gallery space or a high-end home furnishings store?

Plus Good customer service anticipates the customer’s needs and provides a product that delivers the benefits it promised. Consider what services you will offer after the sale has been made. Some examples include delivery, warranty, customer support, follow-up, and flexible refund policies.

#9: Know where your money is coming from and where it’s going. Knowing this involves the most basic of basic financial forms. Use them to see what’s possible both immediately and in due time. These simple forms will guide your steady growth and promise staying power.

A sales forecast worksheet will enable you to see monthly sales. Once you set your monthly projections and get a sense of your growth rate, you will be able to forecast for a year or three!

A start-up budget allows you to see how much it’s going to cost to make this dream business of yours a reality.

An operating budget is often an extension of your start-up budget, because a good deal of your startup costs will be repeated on a monthly or quarterly basis.

A personal budget allows you to gauge how much of your time you can commit to your endeavor. It also reflects the amount of personal finances you may be able, or unable, to invest.

#10: Know thyself, part 2. In the end, it comes back to doing what you love and loving what you do. “Do what you love and the money will follow"--we couldn’t agree more. For one, you’ll have staying power because you’re passionate and you will be less likely to bolt at the first sign of a problem. Additionally, doing something that you truly are committed to will motivate you to find creative and, when needed, alternative ways to achieve the dream—your dream.

Nada Jones and Michelle Briody are the authors of Sixteen Weeks to Your Dream Business, a guide for prospective women entrepreneurs. They blog at Sixteen Weeks To Your Dream Business.

It turns out that being "Made in America" is a marketing plus if you're a manufactured good, and moreover a marketing plus that only gains power during recessions, the New York Times reports. “In hard economic times, a slogan built around ‘Buy American’ is going to resonate a little more,” the article quotes a University of Chicago economics professor. “People read stories about unemployed Americans and they want to feel good when they make consumption decisions.” Makes sense. And it's heartening to find that lots of domestic manufacturers, including a couple profiled in the article are--yup--small businesses.

But that gave us an idea. Americans hear about the embattled American economy and are therefore more inclined to buy American. Might they also hear about embattled small businesses and therefore be more inclined to buy from them?

Certainly strikes us as logical. Small businesses can easily engage and win Americans' intrinsic affection for the underdog. For not only are big corporations generally less embattled than small ones; more importantly, "Buy Big" is not a particularly winning marketing slogan.

So, we say: give it a whirl! Proclaim your smallness as proudly as you would proclaim your Americanness. It's certainly no less worth being proud of. And it just may help your sales.

We reported last week that the world of venture capital wants to be let in on certain federal programs designed for small businesses that aren't typically equity-backed--and that Small Business Administration head Karen G. Mills, herself a former venture capitalist, appears open to this prospect, according to a spokesperson. We guessed that among the people who would be extremely troulbed by this development would be Lloyd Chapman, the head of the American Small Business League, who advocates for the types of small businesess you would probably more traditionally think of as "small business," and who has in fact criticized Mills's selection based on her history in venture capital.

Well, we were right. Mr. Chapman himself emailed us. "Yes you are right, I am going to object to it and fight it at every level," he said. Full email after the jump.

Incidentally, we're posting in the interests of newsworthiness: we don't have a stance, and we would be happy to post a rebuttal from the relevant venture capital group. Email us!

I read your article titled, “Help On The Way For Venture-Backed Businesses?” First of all, I would like to let you know that I have written numerous press releases and blogs about the American Small Business League’s opposition to President Obama and Karen Mills's belief that some of the nation’s wealthiest investors need to participate in federal small business contracting programs. And yes you are right, I am going to object to it and fight it at every level. Unfortunately, in addition to the [Small Business Innovation Research] programs, every other federal small business is under attack right now. The Pentagon is in the process of dismantling programs for minority-owned companies, the women owned 5 percent set-aside has been shot down, the 8(a) program is under attack, and as usual Fortune 500 corporations are still getting most federal small business contracts.

There are so many battles to fight for small businesses, and it appears we are the only group out there fighting them. We are doing the best we can, but there are so many battles to fight that they are taxing our resources. I would encourage anybody in the SBIR community that doesn't want to lose the program to some of Obama's wealthiest venture capitalist contributors to join the American Small Business League and join us in our efforts to save these programs.

Best,
Lloyd Chapman

The Washington Post ran a big, important article Monday reporting that many small businesses and small-business interest groups have objected to the Obama administration's tax proposals on the grounds that, despite the president's purported goal of raising taxes only on the wealthiest while lowering everyone else's, small-business owners who wouldn't think of themselves as the wealthiest end up paying in the wealthiest brackets because they report business profits along with their personal income. So one small business owner and her husband--the Johnsons--whose collective wages combine for under $250,000 but whose total income, with corporate profits, exceeds $500,000, would see their tax burden rise $23,000 should Obama's plan be enacted.

Weirdly, the article goes over halfway by simply asserting that as an inequity. It's not, inherently: the money the Johnsons make through a small business isn't intrinscially any different from money they make through wages they are paid, or even pay themselves through their corporation. It's the same dollars and cents.

However, the Johnsons likely intend and use the separate income streams for separate purposes, and therein lies the rub: much of the company's profits are likely to be plowed back into the company's operations, particularly since her wages are taken care of already. Why should such money be taxed as personal income?

It's not an unfair question. And there is no doubt that not every small-business owner would emerge from an Obama tax system unscathed, or unscrewed. But changing the tax code, no matter the direction, always ends up screwing someone. We're not here to take sides on whom should be screwed. We are here to oppose policy that would screw small businesses; and we are also here to say when a purportedly anti-small business policy is more like small business-neutral. And with this issue, it seems to us there are enough caveats here to make us wonder whether this is truly a small business issue, or whether, like Joe the Plumber's crusade, it is a more clearly class-based and ideological one that is disingenuously cloaked in small-business costume.

For one thing, there's the issue of deductions. Correct us if we're wrong, but income that is used towards business expenses--which is the exact source of the potential inequity we're talking about here--tend to be a highly deductible sort of income. Not only that, but money, which is to say business income, used to hire and to invest in the company is deductible to large extents--extents, indeed, that Obama increased with his stimulus package.

(Another thing Obama's stimulus did, incidentally, is to dramatically expand "carry back" laws, allowing small businesses--and only small businesses--to carry back expenses back five years, as opposed to the usual two. We're going to guess this explains a strange quirk in Mrs. Johnson's 2008 filing: namely, that she will likely owe $0 in federal taxes.)

Most importantly, and as with Joe the Plumber's crusade against raising income tax marginal rates above $250,000--come to think of it, also as with the attempt by some to make the estate tax a small business-specific issue--the sheer number of small business owners who would be affected don't necessarily justify turning the whole issue into one in which combatants are either pro- or anti-small business. Depending on whether you ask, respectively, Treasury Secretary Tim Geithner, the Bush administration, or the nonpartisan Joint Committee on Taxation, then 2%, 7%, or 3% of federal tax-filers with business income would face higher taxes, to any extent, under Obama's plans. Any way you cut it (and given those figures, we'd be very uncomfortable saying the number is over 4-5%), that's not a helluva lot--certainly not enough to make the plan an affront to small business. In fact, if anything, it looks like the Obama tax plan would cut the taxes of the majority of small-business owners. No?

Small-business critics do appear to have a stronger case in pointing out how the Social Security tax generally, and specifically Obama's plan to extend it to income above $250,000 (it is currently capped at income a little over $100,000), screws over small-business owners. After all, since Mrs. Johnson is her own employer, she's paying both sides--which is to say, double--the payroll tax. This is definitely something we're planning on writing about more; and it's inefficiences such as this one that have caused people on both the right (the National Federation of Independent Business) and the left (the New Yorker's Hendrik Hertzberg) to question the payroll tax generally.

But as for the main argument, which is over the income tax rates, it's hard to see how the presence of small-business owners who report business profits as personal income ought to fundamentally change the debate from a largely ideological one. It's worth remembering two things: one, that under Obama rates would be lowered for income under $250k; and, second, that the less income you have over $250k, the less you'd get hit by the raise (indeed, it's entirely plausible that, because of the lower marginal cuts, someone with total income slightly greater than $250k would still see her total tax burden lowered under Obama's proposals).

In other words, under Obama the income tax code would remain graduated; it would only be slightly more so. And that goes no matter if you're a simple wage-earner or a small-business owner, and no matter if you're a typical small-business owner--with income under $250k--or one of the (overall lucky!) few who is making over that. If you want to have that fight out, then be our guests. But leave small businesses out of the discussion.

The opportunities for ambitious, smart, and innovative start-ups and small businesses only keep growing, as even more platforms for smaller applications and products open up. Generally we focus on what we call iEntrepreneurship--the way in which the increasingly ubiquitous iPhone enables third parties to create cool new applications that are based on the iPhone platform and then, in some cases, make a ton of money off of them (all while giving Apple yet one more selling point for its own product). But there are other smartphones besides the iPhone, which are also potential platforms; and there are other potential platforms besides smartphones.

The latest new platform appears to be the mammoth (over 200 million active users!) social-networking site Facebook. According to TechCrunch, though Facebook has historically been among those platforms most reluctant to give third parties free rein, it is changing its tune: it is going to grant developers and potential developers access to much more data, including photos and videos posted by users (with the users' permissions, natch). It also plans more generally to make data transporting more open. Add it all up, and the opportunities for Facebook app-developers, and for developers utilizing Facebook's data, is likely to expand greatly.

"It’s pretty clear that the hot trend on the web is to have a service which acts as a central hub for information, and allows third-party sites and services to built on top of it," TechCrunch writes. It's fascinating stuff. And given who many of those "third-party sites and services" are or are offered by, this "hot trend" is definitely good for small business.

It is a pleasure to read about various local governments that, realizing that small businesses are every bit as good at promoting economic activity, creating jobs, providing tax revenue, and the rest as well always say they are, go out of their way to encourage their creation and flourishing. We've previously written about Youngstown, Ohio, which wants to be the Silicon Valley of the Rust Belt and to that end hatched thhe nonprofit Youngstown Business Incubator. Today, via MSNBC, here's another business incubator: the Brooklyn Navy Yard.

According to the article, incubators such as this one provide numerous incentives to tenants, which are all manner of small businesses. There are guaranteed long-term leases; there are tax incentives; there's instant networking, as all of a sudden you are situated extremely close to a whole bunch of other businesses, who may just need what you provide (or who provide what you may just need). Indeed, what the incubators do in a sense is fabricate and concentrate the same economic multiplier effects that cities create in general. In a place like Youngstown, that is intended to serve as a spur to the larger economy; in a place like the Brookyn Navy Yard--located in the country's biggest city, staring right across the East River at the Financial District--it's probably more starkly for the benefit of the actual businesses housed there.

Either way, such small-business incubators are an important part of the overall economic ecosystem. We wouldn't be shocked if they become an increasingly prevalent tool for local governments to use as we slowly attempt to climb out of the recession.

I’ve written about The Wonderful Solo-K before. It’s a special type of retirement plan also called Solo 401(k) and Individual 401(k). But by whatever name you call it, it provides an opportunity for the self-employed or small business owner with no employees (other than their spouse) to establish 401(k) plans and to max out their deductible retirement plan.

401(k) plans were introduced in 1978, but it took a tax change starting in 2002 to allow business owners to contribute substantially more than they would with IRAs, SIMPLEs, and SEPs. Those new rules applied to both incorporated and unincorporated businesses. Any business that employs only the owner and his or her spouse is a candidate--including C corporations, S corporations, single-member LLCs, partnerships, and sole proprietorships.

Now, practically every major financial service company--insurance companies, brokerage firms, mutual funds--offers a low-cost Solo 401(k) plan. So far so good.

But there’s a flashing yellow compliance light. And accompanying it, there's a legal unfairness for the self-employed or small business owner.

A Solo-K, like a regular 401(k) plan, must meet certain ERISA and Internal Revenue Code requirements. And one of those requirements is the obligation to file Form 5500-EZ if plan assets exceed $250,000, even if the business owner (and spouse) are the only participants.

Sometimes that requirement gets lost in translation, and a self-employed or small business owner whose plan exceeds that threshold fails to file the return. It may be because he or she missed the filing after being exempt for several years before the $250,000 threshold was crossed. Or it may be that the financial services firms at which these plans were established did not inform the self-employed or business owner of the filing obligation.

Form 5500-EZ is due no later than seven months after the end of the plan year, unless extended 2 ½ additional months. So, for calendar-year plans, the 2008 return is due no later than July 31, 2009 unless extended to October 15, 2009.

If not filed on time, substantial penalties can be assessed by the Department of Labor, which oversees Form 5500 delinquent filings--up to $15,000 penalty for each delinquent year.

Now for that unfairness I was talking about.

The DOL does have a Delinquent Filer Voluntary Compliance program, which caps penalties at $750 for one delinquent Form 5500 and $1,500 for more than one year, no matter how many years are involved. And many employers take advantage of the DFVC program. However, business owners who have not timely filed a required Form 5500-EZ are not eligible for the DFVC and could potentially be subjected to large penalties.

Doesn’t sound fair, does it? It isn’t. But until the law or the regulations are changed, check this out with your tax advisor before July 31 if you have a calendar-year plan.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

We're suckers for stories about community banks, those small (under $1 billion in assets), locally-focused lending institutions that are both a crucial credit lifeline for small businesses and, typically, small businesses themselves. The New York Times ran a good one today, about Westchester County's Community Mutual Savings Bank. Despite being an active, publicly-owned lender with five branches and $200 million in assets, as well as having made 10% of its loans to low- or moderate-income borrowers, it hasn't had a foreclosure in three years. How did it achieve this great track record? According to the bank's senior lending officer, “We stick to the parameters that are age-old tested in the banking industry." What a novel idea!

And what makes Community Mutual a wise, successful lender also makes it a great candidate for borrowers. We've highlighted this feature of community banks before: that because they can take a closer, more careful look at all of the variables that help decide whether an applicant is creditworthy or not--thereby helping their own foreclosure rates--they may be a better option, as opposed to a big bank, for a small business looking for a loan. “We’re looking to lend,” said the Chairman of the bank's Board. “We’re on the flip side of what’s happening.”

As they say, read the whole thing.

In light of yesterday's post on taxes, in which we discussed a small business owner who reports both wages from their own business as well as their business's corporate profits on their personal income tax return, it's worth noting a troubling trend: small business owners who, faced with an economic climate this poor, have elected to forego wages altogether.

In the article above, the Wall Street Journal reports on a survey conducted by American Express (which is also our sponsor) that found 30% of small business owners choosing recently not to take a salary from their businesses. "It's not uncommon for owners to give up salaries from time to time to give their companies a temporary lifeline, but business advisers and owners say the prevalence of salary cuts now is unusual even for a recession," the article notes.

Are you a small business owner who has been forced to cut or eliminate your wages in order to keep your business afloat? Or, perhaps, one who chose to do so rather than eliminate the potential for growth or fire employees? We'd love to hear from you, either via email or in the comments.

Either way, one thing is becoming clear: those small business owners we talked about yesterday? The ones whose wages are under $250,000, but whose wages plus corporate profits are above it, and who thus would see their taxes rise under Obama's tax plan? Yeah, they're the lucky ones.

A few thoughts about being a small business owner as the H1N1 Virus--a.k.a. swine flu--dominates our consciousness this week:
* Just a year ago, economists at the St. Louis Federal Reserve published a report on the economic effects of the Influenza Pandemic of 1918. It’s shocking to read the statistics from 1918, but to review: among the 40 million people who died worldwide as a result of the pandemic (!) were nearly 1% of the U.S. population (!!), a figure that would be the equivalent of three million people today (!!!).
* Sales of box springs and mattresses soared, since bed rest was the major prescription of the day, along with drug store sales and health care services.
* In certain locations and industries, massive labor shortages developed as all able-bodied men fell ill and many died.

On the personal front, health scares like this week’s swine flu panic remind me of an important reason why I started a small business. If you’ve got to get out of town or skip going into work, there’s no boss to contradict your decision. You can and must use your own judgment about what’s best for you and your family, and if you own your own business, you can more easily do just that.

In contrast, I remember reporting to my Wall Street finance job in the early morning of Friday, September 14, 2001, while the burning stench and acrid toxins from the smoldering WTC Tower filled our nostrils. Of course the subway didn’t run below Houston Street, about a mile from our office building, so we walked through a rain storm past military checkpoints to a pointless day of following the boss’s orders. We knew it was neither safe nor healthy nor profitable to be there--there were no customers to do business with. But, you know, when you work for Big Co., you do what they told ya. I started my plan to found Cedarcrest shortly after.

Well, the problems with the Obama administration's plans to up small businesses' credit access--which involves taking $15 billion from the TARP fund and using it to buy already-made small business loans on the secondary market, thereby, hopefully, freeing up lenders' balance sheets to make more loans--just keep mounting. There's the question of whether the companies that currently own the loans will agree to sell them to the government and then potentially be subject to all manner of restrictions imposed under TARP's enabling law. There's the question of whether credit is even what small businesses even really need right now (we say it's not, for the record).

Now there is cause to wonder whether the program--which still hasn't been implemented, incidentally--will even do what it's supposed to. What's that cause? Well, the reports are now starting to come in on the initial success of the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF), and the reports are not great. We consider TALF to be an important bellwether in terms of predicting how the small-business credit initiative will work, because, structurally, TALF is the later plan's direct ancestor; structurally, it's basically the exact same thing.

A quick refresher: as we've reported, TALF involves the Fed using $200 billion--although that figure could end up as high as $1 trillion--to buy troubled types of loans on the secondary market in order to free up credit for future such loans. The four such types of troubled loans are: credit-card, student, auto, and...small business. But the emphasis in TALF seems to be more on the first three, which is why, of course, small-business loans are essentially getting their own little TALF fund in the form of the additional $15 billion initiative.

The whole notion of buying up already-made loans in order to enable future ones makes some degree of sense in theory, but since it's never really been tried on this scale and with this level of direct government intervention, seeing how TALF affects new credit-card, auto, and student loans, and how the TALF's execution goes generally, is as good a way as we have to game out how the $15 billion small-business program is likely to work.

And the TALF's execution goes not-so-well. As the Washington Post reports, the program has been marred by a "slow rollout," as well as a reluctance among private investors and brokerage houses--both of whose participation is essential for the plan's most fundamental implementation--to work with the government. All told, in the past two months, the program has backed under $6 billion in loans; many hoped that figure would at the very least have reached double digits by now.

"The challenges in getting TALF running at full speed show the difficulties facing the Treasury and the Fed as they design new programs to try to deal with the financial crisis," the article concludes. In-deed. The small-business lending initiative is surely one such new program, and these results therefore surely represent some cause for concern.

And, in the end, none of this deals with the fundamental question: is credit even what small businesses need right now? Via Independent Street comes news that a pilot small-business microloan program in Washington, D.C.--undoubtedly one of the most prosperous and "growing" regions in the country right now--is essentially a failure simply because the demand for such loans just isn't there right now. It is only looking more and more like that $15 billion could be put to much better use in a non-credit-related context.

Knowing that you probably don't want to lay off your valuable employees, for both business and non-business reasons, but also realizing that you need to cut costs and that your greatest costs probably come out of payroll, we've tried to present ways for you to lower payroll costs while retaining employees. Last time, for example, we examined cutting work-weeks, which enables you to retain talent (and giving them some manner of flexibility) while cutting down on costs. We also looked at top law firm Skadden, Arps, Slate, Meagher & Flom LLP's strategy of telling workers to take a year off.

Today, via the New York Times, we examine the furlough. Unlike cutting workweeks, this does involve telling employees to stop working, if only for a while. And unlike Skadden's method--in which associates got paid about $80,000 a year to do absolutely nothing--you don't get paid when you're on furlough. Basically, they are forced, unpaid leaves-of-absence. But that's still extremely different from layoffs!

The article provides a good rundown of different versions of the furlough, as well as of upsides and downsides. Here's one downside: since you're still paying for the furloughed employee's extremely expensive benefits, to say nothing of flat costs such as office stuff and the like, they're not really that cheap. And here's one good idea: a furlough bank, that lets employees trade with each other (so that those who want more time off, perhaps for a sabbatical, can "take" the time off of those who don't want to take any time off).

And, finally, an upside: as one person who writes frequently on the work-life balance puts it in the article, "Workers may become more efficient because they know they have to get work done in less time. And because these workers are going to be less stressed when they’ve had some time off, I think they’re going to be happier and more productive and creative. We may find that a temporary solution becomes a permanent solution.”

Now is the time to be flexible, and to experiment with cutting costs. The furlough seems like as good a starting point as any.