Here's a wonderful feel-good story to begin your day. It makes us feel good, anyway, because it combines two of our favorite obsessions: community banks and creative capitalism (remember: the key to creative capitalism is the insight that for-profit ventures can also meet philanthropic ends, and may even be able to do so better than non-profits).

Entrepreneur profiles Emerging Markets Inc., a small business out in Los Angeles. Founded and run by two urban development specialists who, naturally, came out of the non-profit world, Emerging Markets seeks to increase legitimate bank lending into low-income urban neighborhoods. It also seeks to make money. The way it does both is by conducting extensive market research in these various neighborhoods--being sure to go well beyond impersonal metrics and into more holistic considerations such as community politics--and then selling their research to various banks (there's the making money part), who can in turn use it to up their legitimate lending in those areas (there's the doing-good part).

What a lovely synthesis! And it's one that particularly lends itself (pardon the pun!) to community banks, who are much more open to making smaller loans based on more subjective criteria. Indeed, you might say that community banks who branch out to these neighborhoods are engaging in their own brand of creative capitalism as well. Just one more way the nation's small businesses are well-suited to start turning themselves and their country around at the same time.

Our frequent iEntrepreneurship triumphalism--our belief that certain big-company platforms such as the iPhone, the BlackBerry, and the like (also Facebook and Firefox) are great things for ambitious entrepreneurs to leap off of with their own innovative products--makes us duty-bound to print rebuttals. TechCrunch ran a good one recently, pointing to one study that showed that, of the nearly 36,000 (!) authorized iPhone applications, almost all routinely spend days without being downloaded once to any of the millions and millions of active iPhones.

Perhaps even more surprising, though, is the fact that even those apps that are being downloaded aren't being downloaded that much. One app that is among the top 40 downloaded social-networking apps averages about 25 downloads per day. At around 99 cents, that's daily pocket change (and if you raise the price, you surely lower the number of downloads).

So why is it that, as the post puts it, "The App Store probably will not make you rich"?

Ironically enough, the answer has to do with one of the reasons we think the App Store represents such a great opportunity: the extremely low barrier to entry. Remember, all you need is a bit of savvy and expertise, maybe a tiny bit of cash (or maybe not), and some free time, and you can create an app; getting on the App Store's official listing requires barely more effort or funds. Which makes it very easy for you to do it. But it also makes it very easy for everyone else to do it, flooding the App Store with, literally, thousands and thousands of apps, and taking attention away from yours. The end result is that only the very rare blockbuster rises above the din and starts making some real money for its creators.

But, as the author notes, this doesn't make the iPhone application business a uniquely challenging one. Rather, it makes it roughly as challenging as any number of other pursuits. If you're the type of person who wants to be an entrepreneur in the first place, you probably won't find that reality quite so daunting, and will plow ahead nevertheless. In which case, we wish you the best of luck!

To encourage you, check out this video, courtesy of Galley Cat, that explains how to build your very own iPhone literary app, for fun--and, just maybe, profit!

Ever since the prospect of massive bailouts of Detroit's Big Three was raised several months ago, we've pointed out that their implosion would threaten thousands and thousands of small businesses who are tied up, directly or indirectly, with General Motors, Ford, and Chrysler. Well, Chrysler is bankrupt, and ready to be sold to Fiat; GM is bankrupt and ready to see itself become a ward of the taxpayers and the workers (Ford is actually doing pretty well, thank you for very much).

The New York Times takes a look at auto suppliers, mostly in the Midwest--who, together, employ more people than the Big Three do (and certainly more than they will after they are slimmed down; GM alone is cutting about a third of its workforce). Of the roughly 4,000, an estimated 500 will go bankrupt this year. And many of them are quite small.

The Lansing, Mich.-based Strong Brothers, for example, had seven employees back when it was making lots of fenders and hoods for GM (it also wisely diversified into airplane parts). Now, they're down to three employees, and the outlook isn't brilliant.

Like the Strong Brothers, other small suppliers are attempting diversification. One now makes food and beverage packaging; another is looking into manufacturing opportunities in the energy and medical industries. (If you can diversify without fundamentally altering your business altogether, it seems to be a smart strategy.)

The article is sobering and saddening. And what's worse is to think that it barely even scratches the surface. Directly implicated small businesses are surely myriad. Indirectly impacted ones--the small businesses dotting Midwestern cities and towns, reliant for their customers on the continued economic activity of those three diminished industrial giants--are surely much more numerous.

The big news from President Obama's letter to Democratic Sens. Ted Kennedy (Mass.) and Max Baucus (Mont.) (read it here), perhaps the two most important senators as far as passing health-care reform is concerned, is that he is newly open to "mandates"--essentially, requiring everyone to purchase health insurance (with an extensive system of waivers and subsidies). Mandates are, arguably, the more progressive choice, one which Obama did not support in the Democratic primary even as his two main rivals, Secretary of State Hillary Rodham Clinton and former Sen. John Edwards, did.

However, the passage that leaped highest off of the page for us was this: "In addition, while I believe that employers have a responsibility to support health insurance for their employees, small businesses face a number of special challenges in affording health benefits and should be exempted."

Yes, now we have to quibble about what is and isn't a small business; and then we have to figure out how to provide insurance for those exempted employees without perpetuating the disadvantage small employers currently experience in this realm. Oh, and then, we have to persuade the recalcitrant insurance companies to get on board. But still, even the acknowledgement of this discrepancy, between small and big companies, is music to our ears.

Any comment on the SHOP proposal, Mr. President?

By one measure, four times more. ADP has released its monthly job survey. Combined, small and mid-sized business--so those with under 500,000 employees--lost 432,000 positions, compared to large businesses' 100,000. Small businesses (under 50 employees) lost 209,000; mid-sized lost 223,000. Recovery? Probably midway 2010.

Well, it's better than last month's!

The Washington Post (our corporate older brother) runs a great article on a local (semi-) small businessman, Jack Fitzgerald, and his efforts on behalf of his embattled type of business. Fitzgerald owns nine D.C.-area car dealerships--except seven of them are set to close under General Motors's and Chrysler's bankruptcies. Fitzgerald has taken a leading role in a larger effort by thousands of national car dealers--who have organized a not-unsophisticated lobbying operation--to prevent these closures. "The dealer complaints have resonated in a way that the objections of bondholders and others have not," the article reports. "Many are leaders in their local communities, where they are a source of jobs and philanthropic dollars, and they are a potential political force for disrupting the Obama administration's effort to quickly restructure the nation's ailing auto giants." Ah, the power of the local, connected small business owner.

(Incidentally, here we learn that Fitzgerald's are among the "most customer-friendly" dealerships in the country, and that the closures of his dealerships represent "political payback" for his longtime criticism of domestic auto manufacturers.)

Indeed, the dealerships' plight provides one more reminder of just how far-reaching the collapse of GM and Chrysler are. But the fact is, the dominos don't even stop with the dealerships. Local small businesses that do business with the dealerships are sure to get hit. Municipalities and counties deprived of the tax revenue are going to get hit. Even local Little League teams, with sponsors suddenly pulled out from under them, are going to be in trouble! Not everyone can quickly find another sponsor like Man U did. This, of course, is exactly why when some cities and towns decided to enact makeshift bailouts for local businesses, the dealerships were among their first targets.

We wish them the best of luck. We're still not sure they should be under the Small Business Administration's purview, though.

It promises to be a rainy weekend--for us, anyway--with much indoor-time for reading. Some things worth tackling if you find yourself in the same position.

Introducing...Connectodex. The American Express OPEN Forum (published by our sponsor, American Express OPEN) has launched the beta of a new directory of businesses worth doing business with. [OPEN Forum]

Aiding Alinea. Chef Grant Achatz's avant-garde Chicago restaurant is one of the most celebrated in the country (and it's all the more remarkable when you know that Achatz is in his mid-30s and has been, so far successfully, fighting mouth cancer, which impaired his sense of taste). This is a great piece on the small businesses who supply Alinea with all the gadgets it needs to craft food in its innovative molecular-gastronomic style. [Inc.]

To understand employees, try being an employee. An interview with the founder/owner of DailyCandy.com, a shopping and culture e-newsletter. [NYT]

The networking must go on! Even if you're unemplyed or out of business, you should never stop making more contacts. [WaPo]

Do what you love...for profit. Entrepreneurs whose businesses are derived from their hobbies. [Entrepreneur]

Small Business Administration head Karen G. Mills is currently on something of a barnstorm, touring the country to popularize her agency's new lending policies--the temporary waiver of fees, the increase in the amount of loans the SBA will guarantee, the America's Recovery Capital microlending program, etc. (The tour strikes us as a smart idea politically, incidentally.) A Columbus, Ohio business journal has a dispatch from one of her recent stops. Her takeaway? "The sense from small businesses and others is that the free fall has stopped. But we still have a ways to go.”

Intriguingly, John Tozzi at The New Entrepreneur has it from the CEO of the Opportunity Finance Network--a group of lenders that focus on low-income borrowers and neighborhoods, which we previously wrote about here--that demand for credit at these so-called Community Development Financial Institutions is up. Tozzi points out what makes this fact so freighted with significance: namely, the fact that demand for credit is down at traditional banks. What's going on?

Our best guess is a weird negative feedback loop, wherein, several months ago, when things were even more dismal in the financial industry than they are even now, many, many otherwise-qualified borrowers found themselves shut out of big-bank lending, as most banks stopped off small-business lending like there was no tomorrow (since, at that point, the prospect of tomorrow did indeed seem less likely than usual). This in turn led small businesses to the CDFIs and perhaps other less-traditional lenders--a notion borne out by the CEO's claim, "We are just seeing so many businesses who are not our usual customers, who are in effect up-market from us, who’ve been banked for 5 or 10 or 15 years, and have just seen credit dry up." So demand at the CDFIs goes up; meanwhile, even though the banks are beginning to lend again, the consensus dicatates that they are not, driving demand there down.

The good news about this state of affairs, so far as we can tell, is that these big banks are going to start wanting your business back, and the way they're going to try to get it is, naturally, by offering to lend to more of you, and on more favorable terms. Hey, it could happen!

Could we finally be reaching the small-business credit turning point?

There are many tax advantages you enjoy by participating in your company’s retirement plan; and this goes if you own your own company, too. In order to enjoy them, you of course must comply with federal rules governing qualified retirement plans. And one of those rules requires that the plan be in writing and amended in a timely fashion in order to reflect changes to its provisions as well as changes in the tax laws.

In some cases, these changes may be handled with "snap-on" amendments. In other cases, however, the plan must be rewritten because of the number and complexity of the changes in the law--referred to as a "restatement," or, more simply, a "re-do." And that time is now.

WHY NOW?

In June 2001, a major piece of tax legislation was passed. The new law, the Economic Growth and Tax Reconciliation and Relief Act, or EGTRRA, made significant changes to the Internal Revenue Code as it affected retirement plans.

Because it was eight years ago, many people may have forgotten about its impact on retirement plans. But EGTRRA actually made dramatic enhancements: permitting employees to save more in employer plans and IRAs; easing portability among various plans; and providing significant administrative and fiduciary relief to employers who sponsor retirement plans. EGTRRA also included measures like the Saver's Credit, which benefits low-income savers, and catch-up contributions, which permit older workers to save more under the plans.

Until recently, employers only had to adopt interim amendments to conform to EGTRRA. But now, the IRS requires that all employers amend and restate their written documents to incorporate the changes made by EGTRRA.

Specifically, the IRS issued a Revenue Procedure that implemented a formal (and complicated) system, under which all plan documents are required to be restated by specific dates. The dates depend upon the type of plan document and the employer EIN. I am discussing the "redo" or restatement relating to pre-approved plans, including 401(k) and profit-sharing plans, since such plans account for roughly 94% of all qualified retirement plans.

These pre-approved defined-contribution plans generally need to be redone by April 30, 2010. But from a practical standpoint, it could be sooner.

Why sooner? It's because another tax law, the Pension Protection Act (or PPA), had not been enacted when pre-approved EGTRRA documents were submitted to the IRS for review (the PPA passed in 2006), meaning that the IRS did not include the changes made by the PPA into the EGTRRA restatement process.

Thus, each employer will be required to adopt a separate PPA amendment by the end of the plan year beginning in 2009. So for cost and efficiency purposes, it might be best to handle EGTRRA and the PPA at the same time.

WHAT DOES THE IRS REQUIRE?

Generally, you will need to craft:

1. A restated Plan Document.
2. A Resolution adopting the restated Document.
3. A separate Trust Document (in some cases).
4. An Adoption Agreement (for prototype documents).
5. A restated Summary Plan Description that must be distributed to all participants and beneficiaries.

WHAT YOU SHOULD KEEP IN MIND

* Take special care not to eliminate or reduce "protected benefits”. These include lump-sums distributions and annuities, as well as the timing of distributions, such as an early retirement provision.

* Consider submitting the plan to the IRS for a favorable "determination letter" that applies specifically to the employer's plan. Employers with pre-approved plans automatically have assurance that the plan language satisfies the IRS requirements, assuming no changes are made to what was approved. However, based on an employer’s individual circumstances, it may be desirable to apply for a determination letter covering periods prior to the effective date of the restatement.

* The cost of restating a plan will vary, depending on the type of plan. This cost to restate the plan for IRS compliance may be paid from the plan's assets if the plan document permits.

* Thoroughly review the plan to make sure that it still meets the needs of the employer and the employees. This could be an opportunity to make plan design changes as part of the restatement process.

WHAT HAPPENS IF YOU MISS THE DEADLINE?

It can be a serious matter if you miss the deadline: the IRS can disqualify the plan, meaning it would lose its tax-favored status:

* You would lose the deductibility of employer contributions to the plan;
* Your employees’ vested account balances would become immediately taxable; and
* The trust would lose its tax-exempt status and become a taxable trust.

Bad stuff, in other words. Disqualification can be avoided by using an IRS correction program, which involves paying a sanction and submitting an updated plan--an option you should be thankful exists but which you should avoid resorting to.

IN SUMMING UP...

It is the plan fiduciary's responsibility to ensure that the plan is updated and signed by the deadline. The restatement process can be time-consuming, and should be properly planned to absolutely ensure that the deadline is met. This means starting in 2009.

This article is being provided for general informational purposes only and should not be considered tax or legal advice. Employers should discuss their individual circumstances with their advisors.

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.

It would be weird if we didn't write about the iPhone and its Application Store and iEntrepreneurship--the accessible and potentially lucrative opportunities that exist for small app developers--on this, the first day of Apple's Worldwide Developers Conference (live-blogged by the New York Times's Bits blog here). Yes, today's biggest news is probably the iPhone 3GS. But apps were also very much on the agenda. Indeed, the 3GS is related in that it will likely see Apple selling that many more iPhones (in addition to the 40 million it already has), which in turn makes downloading apps that much more of a potentially profitable enterprise.

Entrepreneur's Daily Dose checks in from the San Francisco conference, reporting that "The buzz" at the conference "continues to be apps, apps and more apps."

Here's an interesting twist to the already significant dynamic between Apple's iPhone platform and myriad small businesses' and entrepreneurs' apps: as the software and hardware change (this is on Apple's end), the opportunity for apps increase (this is on the other end). The 3GS's increased speed might make new sorts of apps more feasible. Ditto the new and improved camera. Software that allows "tethering"--using the iPhone's Internet connection to log your computer onto the Internet--is forthcoming, no doubt creating a new environment for new types of apps (except proprietary carrier AT&T may not be offering it!). And peer-to-peer gaming capability will surely lead to the development of new games and increased downloads of current ones.

But how, you ask, is this going to make you any money? The Times answered that in the paper this morning, reporting, "a new way to profit from writing software for the iPhone is emerging: Sell the apps, then sell your company." The reasons why some of the world's largest media companies would pay good money for these apps' companies are interesting, but more germane for us is the fact that this is going to make some entrepreneurs very wealthy, and, contra iEntrepreneurship skeptics who point to low download numbers and revenue, is not necessarily tied to how your app initially performs.

Okay, okay, we're also just excited for the new iPhone. But clearly further strides for iEntrepreneurship were made today.

In this, the second installment of my series (first installment here) on what makes people great entrepreneurs, we begin analyzing the nine key personality traits that increase your chances of success. As a reminder, I believe the nine traits are: big dreamer, natural leader and decision maker, obsessive passion and drive, macro-manager, rational optimist, healthy fear of failure, little fear of risk, controlling but not freakish, and disciplined personal life.

Let’s start with what may be the single most important characteristic of great business impresarios: being a big dreamer. Here, I always think of the great 1950s TV show, The Honeymooners. Always downtrodden bus driver Ralph Kramden (he is based on the Madison Avenue route) kept looking for that one idea or project that would take him and his wife Alice to Easy Street. “This is the big one, honey,” he would scream. Of course, each time his hopes were dashed, but he realized what really mattered in his life was his good friend Norton and his great wife.

Great entrepreneurs have that same excitement, though hopefully with greater success than poor Ralph. The key is figuring out something you can do differently or better than everyone else out there. Or finding something that’s never been done. Note that innovation, by itself, is only the beginning. Someone has not only to come up with it but also know how to take it to the market; and it has to satisfy some unmet need that exists. After all, some of us remember great innovations like the Sony Betamax and Quadrophonic stereo--and more of us don't, because they bombed spectacularly.

There are plenty of great big ideas that aren't as dramatic as a true breakthrough. For example, I started my own law firm doing something very few, if any, others starting law firms did. I centered the strategy on basic marketing concepts. I asked myself, what are the two things that clients complain about the most when dissatisfied with their lawyer? Assuming the lawyer is basically competent, the two main things are: he or she charges too much, and he or she doesn’t get back to me quickly enough. You can be a great lawyer, but if you overcharge or are inaccessible, you are basically worthless to the client.

So what did I do? I immediately established an absolute four-hour telephone callback rule for clients. When they call any lawyer in our shop, they will for sure receive a call back within four business hours. Of course, in most cases response time is even shorter. Would any firm say they seek to do the same? Of course. Do they all do it? No. Do any of them make it formal policy? No others that I know of. Differentiation. I may not have invented the iPhone (or Betamax), but this was a marked and marketable innovation that I used to advance my business.

In the area of fees: while I did not invent flat fees, we embraced them for corporate transactional work over 15 years ago, when it was quite controversial indeed. I believe billing by the hour is a conflict of interest between me and my client, and even when you bill honorably, many clients still suspect that you are not. The flat fee removes that concern. It also helps bring an uncertain potential client through the threshold by eliminating one major uncertainty in a new relationship. While some firms have begun to use flat fees, most are doing so reluctantly. We do so enthusiastically. Differentiation.

Does any of this compare with, say, Bill Gates’ brilliant marketing of software for personal computers or Richard Branson’s service-based Virgin brand? Obviously not. But it shows the power of thinking big--which really means thinking of old things in new ways even if you are not thinking up something entirely new.

Gates did not invent the PC. He just helped develop software to make it run, and many other companies also did that. His brilliance took the form of a simple big idea--he was the first to license the software to any PC manufacturers that wanted to use it. And what did Apple do--Apple, whose software many feel was (and is) better? Apple sought to control distribution of their operating software by allowing it only on their machines. That is why, critical buzz aside, Microsoft continues to eclipse Apple’s success dramatically. "Think Different" may be Apple's slogan, but Microsoft put it to work with even greater success.

Richard Branson did not invent airlines or good service: his own style and focus on customers made people want to be part of his universe. Because he thought and dreamed big.

The infamous Soup Nazi provides a small lesson. For years, an apparent urban legend about a small stand with incomparable soup but an incorrigible owner swept New York City. Turns out it was true: the stand known as Soup Kitchen International on 55th Street. Proprietor Al Yeganeh dished out great soup with bad attitude. A classic Seinfeld episode where the term Soup Nazi was used in referring to him gave Yeganeh instant infame. An earlier reference, in the classic movie Sleepless in Seattle, provides the lesson. In that movie is delivered the great line, “It’s not just about the soup.”

When you think big remember: the market need drives the product or service, not the other way around. And also remember that it’s not just about the soup.

Next we find out if you are a natural leader and decision maker. Stay tuned!

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.

We've been deeply concerned about the Obama administration's plans to use $15 billion from the TARP fund in an effort to increase the flow of small-business credit for quite some time. To recap: the plan is to use the money to purchase small-business loans from their current holders, thereby freeing up banks' and holders' balance sheets to make new loans. In theory, this strategy is perfectly sound. In practice, though, it's never really been tried, and indeed early reports from the strikingly similar TALF initiative are not good. The bigger problem, though, is that the plan is wincingly dependent on the cooperation and active participation of private-sector actors. And, in this instance, they are (understandably) not biting: the six largest holders of these loans, who together own 80% of the relevant loans, do not want to participate in the program. And so it remains on hiatus.

Well, last week a similar plan was officially declared D.O.A. for similar reasons, leading us to wonder when the $15 billion initiative's time will be officially up. Last week, the Federal Deposit Insurance Corporation "indefinitely postponed" its Legacy Loans Program, which involves those famous public-private partenerships in which investors would use some of their own capital and lots of government (that is, taxpayer) leverage to buy bad assets off of banks. The program was set to begin later this month, with the targeted purchasing of $1 billion in soured mortgages.

However, the banks won't bite. "Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses," the New York Times reports. "Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay." Who can blame them? Not us.

Now, let's not lose sight of something. In many ways, this is good news--it means the banks think they can ultimately get a better deal by holding onto these bad assets, collecting payments when they can, and waiting for a day when they can sell them for prices that don't cause them huge writedowns. Were that day ever to come, it would be a wonderful day for the financial industry and the economy generally; and even the fact that the banks think that day will come, and will come before their balance sheets drive them to insolvency, is both a good sign and an amount of optimism that will intrinsically have a buoying effect on the economy and those assets. So in that sense, this is great news!

However, as a harbinger for the administration's plans for small-business credit, it's bad news. These banks' refusals had direct consequences--it killed the government program. That's quite a precedent, and it suggests that the private actors' refusal of the $15 billion initiative might, too, kill that program.

Still, we'll try to view this as an opportunity. We were never gung-ho on the credit initiative anyway, chiefly because we don't think credit is the problem, and that there are probably better, non-credit-related ways to spend that $15B.

So, howsabout this, federales: you admit that your small-business credit initiative is effectively dead, and waste no time finding a better use for that money--something that will provide immediate and significant relief to Main Street small businesses--and, in exchange, we will go easy on you. Deal?

Two recent articles explain that if you're a small business owner without an Internet presence, then you are not even close to alone. You are also playing ball with one hand tied behind your back.

This piece in Entrepreneur notes that 62% of small businesses do not have an Internet presence. And this is, as the author also notes, insane: "Establishing and maintaining a web presence is incredibly cheap and easy these days. And web advertising is much more powerful than most traditional print or broadcast advertising in that it enables the business owner to engage customers in a two-way conversation and gain valuable feedback on their products and services." The fact is, being on the Web is incredibly cheap in absolute terms. In relative terms--as compared to paying for more traditional advertising and marketing efforts--it is unbelievably, almost impossibly cheap. The piece goes on to offer some awesome tips for getting started. The whole thing is worth a read.

Meanwhile, a New York Times piece focuses on one specific type of Web presence that small businesses are beginning to exploit: social-networking sites. These, remember, are cheap, even free. They allow businesses to craft their own marketing content. And they are an incredibly efficient way to reach a desired niche.

Take BizBox, which is not exactly a small business, but same principle. We have a Twitter (follow us!). it has helped us to attract readers and pageviews, and has also proved helpful at various points when we have sought out interview subjects, or answers to questions. Additionally, we frequently will submit blogposts to BizSugar, a (free) social-networking site in which users post articles or blogposts that they think other small business owners and entrepreneurs would be interested in reading.

The additional point we'd make is that the Internet, and especially social-networking sites--where pouring in extra resources and money really won't help you--are, at the very least, great levelers, and at the most, actually specifically advantageous to small businesses. You ignore them at more than your peril. Ignoring them is fundamentally antithetical to the whole concept of smallness. And smallness is a concept worth embracing, because compared to the big guys, it's the one thing you've got and they don't.

A couple of weeks ago, we talked about how private lenders might not be willing to play ball with the Small Business Administration's America's Recovery Capital microlending program. The program, you'll recall, would see the SBA backing interest-free loans of up to $35,000 100% for small businesses with outstanding bank debt--the idea being that they use the extremely cheap and favorable credit to pay down what they owe. The lenders were worried about the particulars of the plan, and whether participating would make business sense for them. (And who can blame them? Not us.)

Well, the particulars have now been codified, and the lenders remain skeptical--bad news.

Fortune provides a nice primer on the program. In essence:
-The loans are available to businesses that have been around for two years or more (so no start-ups).
-Borrowers must thread the needle of being both under duress and "viable". For the former, sales should be down 20% or payments should be difficult; for the latter, cash flow projections should indicate promise.
-The loans that the ARC loans would pay down must not be more than 60 days overdue.
-Though SBA-backed loans prior to February '09 are ineligible to be paid down with ARC loans, the overdue loans can be used to pay down pretty much anything else business-related: mortgages, non-SBA bank loans, even personal credit-card debt that involved business expenses.

Sounds great, right? Yup, and $255 million has been allocated for it; the SBA guesses that 10,000 small business will receive ARC loans.

Well, that is, if the private lenders agree to participate.

You see, it seems--again via Fortune; swell job covering this one, guys--that many lenders who were initially skeptical due to the lack of information about the program are now skeptical because of the information about the program. Specifically: there's a question of whether making these loans are really worth it. Well, is it?

Remember, for the borrower the loans are interest-free ("ARC loans are a sweet deal for borrowers," Fortune observes), so any profit for the bank is going to have to come from what the SBA agrees to pay them. And the SBA has agreed to pay them prime +2% interest--which comes to 5.25%, for now. That's low. Now, you'd expect the interest on a 100%-guaranteed loan to be low indeed--you don't need to charge as much interest when it's backed by the full faith and credit of the U.S. government. But the fact remains that when you throw in administrative costs--especially where you need to go to the SBA and get your money on failed loans--and the rest, the margin starts to look pretty thin if you're a profit-seeking lending enterprise. Now add the process by which banks have to recover on defaulted loans from the SBA, which the article calls "onerous," and the prospect of being punished for allegedly lax underwriting standards should too many loans in your portfolio default, and, if you're a private lender, making ARC loans truly begins to look like more trouble than it's worth.

A federal credit plan for small businesses failing because private actors legitimately don't want to participate? We know we've heard that before. We're pretty sure we discussed it yesterday, in fact.

Meanwhile, not all lenders are saying they may not participate in the ARC program. A North Dakota community bank CEO tells Fortune that "the weak financial incentives and uncertainty surrounding the program are outweighed by the needs of the community. 'The interest rate is irrelevant. We're only dealing with $35,000....The more important point is helping businesses survive. Those businesses may have $150,000 loans from us in the future. It's that long-term goal that's making us want to help them survive in the short run.'"

Certainly that makes sense. But in a credit environment as debilitated as the current one, should that weighing process even need to take place? The ARC program should either be more worth private lenders' while, or--and we tend to think this is what makes the most sense--it should not require their participation in the first place. What we mean to say is: would direct SBA loans really be that bad?

A great column over at our Washington Post brother site provides a new perspective on small businesses: namely, that it's a business. What do we mean? Well, in all the talk about small businesses, and the passion involved, and the personal risks and rewards, what sometimes gets lost amid that din is the truism that the most passionately-run business in the world is unlikely to make you particularly happy if it also makes you bankrupt. Being happy with your business in part means doing well with your business. Sounds trite and obvious, but as we say, frequently this crucial aspect goes overlooked. We would definitely point a blaming finger at ourselves for this, too.

The column concerns a D.C.-area chain of dry cleaners. Why dry cleaners? Well, the husband-and-wife team that own them--there's a classic staple of a small-business success story--decided on entering the dry-cleaning business not out of any passion for cleaning people's clothes, but because it seemed like an awesome business model. You see, one of them used to perform audits for the IRS, and she knew what she was looking for. Columnist Thomas Heath sums it up:

First, stay away from businesses selling perishable goods; a downed utility line can ruin a freezer full of food. Second, avoid businesses that require lots of inventory, like clothing or liquor stores, where the owner must buy the goods upfront and hold them until sold. Finally, own a business where you get paid before you do the work, which means you don't have to chase the customer for your cash.

Theresa knew dry cleaning was a good fit when she sniffed around the books of a company that some friends were interested in buying. She also liked the fact that dry cleaning isn't seasonal, and that it is used by people of every income level.

Sure enough, their three stores enjoy an extremely favorable 25% profit margin. All told, with all expenses and even $2 million in start-up debt accounted for, Heath estimates mid-six-figure annual income for the couple.

The lesson here isn't that you shouldn't follow your passion. If you have your heart set on starting a high-inventory business--a hardware store, say--we're not going to tell you shouldn't, or that you can't succeed; you should, you can, and plenty do. The trick is merely to take whatever entrepreneurial passion you have and then temper it with rigorous business sense, and only then make the big decisions. All the passion in the world won't guarantee your success; and all the passion in the world without success won't guarantee you happiness.

Meanwhile, if all you want to do is enjoy the fruits of owning your very own high-margin business, then may we suggest dry cleaning?

The New York Times runs a cute article on certain Monday nights at Philadelphia's Helium Comedy Club. Basically, think open-mike night, except substitute bad (or, on a good night, halfway-decent) jokes and routines for some serious entrepreneurial networking. Local small business owners get on stage and share their experiences and thoughts with others. The nights, and others like them (mainly in Philly and Los Angeles), are organized by Ideablob Corporation, whose Website serves as a clearinghouse for entrepreneurs' great ideas.

Fun fact! Ideablob was spun off from now-effectively-defunct small-business credit-card company Advanta two years ago. The article focuses mostly on the Advanta paradox: that the company, which for obvious reasons currently has a terrible name in the small-business community, also has pulled off this remarkable triumph of branding in the small-business community.

What interests us, though, in addition to notifying you about the program, is to observe just how important it is for entrepreneurs and small business owners to listen to each other. On the one hand, each small business is unique in so many ways, so there is only so much that can be gleaned; on the other hand, because each small business is unique in so many ways, it is very difficult to formulate broad rules for everyone to follow (as opposed to big corporations, which, we'd posit, tend to be more alike than small businesses). Because of this, listening to the past experiences and learned-lessons of others who once found themselves similarly situated to you is the best, and maybe the only, way not to proceed into the future completely blindly.

The big news this morning is that Kiva, a non-profit that lets ordinary people make microloans to wannabe entrepreneurs and small business owners in developing countries around the world, has broadened its business. Now, those making microloans to Kiva can also lend to small business owners right here in the good ol' U.S. of A. It's starting with 45 businesses in only a few metropolitan areas--Boston, New York, Miami, Atlanta, and San Francisco.

And we don't even need to make the leap to suggest that Kiva's move resulted from the credit crunch and the continued inability of small businesses to obtain credit, because Kiva itself is explaining their move in those terms: "the reluctance of U.S. banks to lend during the past nine months caused the San Francisco-based nonprofit to reconsider," the AP reports, attributing the sentiment to Kiva's president.

Most of the reactions worry about what this means for what Kiva is, and for how money might now be diverted from developing world entrepreneurs who need it even more. In fact, Inc. already had a blog all about Kiva, and its response to the news is certainly must-read. "U.S.-based entrepreneurs are on a different playing field than those who are trying to operate businesses in developing countries," the author argues. "Despite the reluctance of banks to give funding to entrepreneurs right now, it seems to me that entrepreneurs in America have more resources at their disposal."

Certainly valid points, and we are glad there are people out there worrying about such things. For our own part, however, we approach it more purely from the perspective of what this means for the small-business credit environment.

Our general take has been that credit is not the issue--that most small businesses probably don't even need loans right now; first, they need business to return.

However, microloans like this are different. We're not talking about taking on massive debt for substantial, ambitious growth; we're talking a little bit of un-risky leverage to give small businesses, temporarily, a bit of extra cash to play around with. And unlike the Small Business Administration's ARC Program--and who knows whether that will ever get off the ground--these Kiva loans would be available, presumably, for any use, not just for paying down pre-existing bank debt.

So we're very curious to see how this turns out. We've bookmarked that Kiva blog, certainly. Might this turn out to be a whole new model for small-business credit?

When we advise you to take advantage of the recession, and play to its "strengths," as it were, we should note that it's not really as though you have a choice. You don't live in a world where the economy is booming and consumers are spending freely. It's not "try to play to the recession" vs. "try to maintain business as usual". The only alternative to the first option, rather, is quite possibly to go out of business.

Which is not to say there aren't very real ways to let the recession improve your business. When we talk about the recession actually being good for small businesses and likely to lead to an increase in entrepreneurship, we're not kidding. big think has a sweet post on this subject. "The recession is a fantastic time to strengthen your business—and ultimately be more successful," the author writes. "However, to make use of the recession, we must embrace the new set of restraints and other challenges that come with it. Rather than just tolerate these dire times, we must run with them."

Basically, the recession affords you the invaluable opportunity to slim down and renew your focus. It also--and this is something we've pointed out before--creates a much lower cost of failure (because success is not nearly as big as it is during boom times), creating a more conducive environment to the sort of smart risk-taking that really strenghtens businesses in the long run. In sum, the recession will force you to do the sorts of things that will both get you through it and then leave your business healthier and stronger than ever when the recession ends--leaving you well-situated to enjoy massive success once things pick up again.

Meanwhile, if you want more specific recession-business clues, whom better to talk to than Wal-Mart? The New York Times does, and the results are intriguing. You already knew cheap was in. But more specifically, being at home is in, as vacations are currently prohibitively expensive (luggage sales are down; sales of nice flat-screen TVs are, believe it or not, up; popcorn poppers are selling through the roof). You knew new cars are down; but repairs, and items such as spare tires, are, correspondingly, up. (Indeed, we've noted before that many industries that are thought of as "recession-proof" tend to be dominated by small businesses.) Another fun fact: despite lower consumer spending, sales of vitamins are way up--because the cost of missing a day of work just got a lot higher, as did the cost of going to the doctor and having to buy truly expensive medicine.

Which is not to say you should immediately change whatever your business is to a discount-health-food-store-that-also-sells-car-paint. It is to say that you should be thinking along these lines. Consumers are acting differently than usual, but they are also acting fairly rationally. Mere common sense should lead you to some pretty accurate conclusions about their likely behavior.

A premise: health-care reform is going to happen. Perhaps the most credible source on this is none other than President Bill Clinton, whose utter and debilitating failure to enact health-care reform back in the early '90s is the ultimate object lesson for reformers today. He tells the New York Times, "[President Barack Obama's] got a better Congress, a more receptive climate. He also has, frankly, a better--at least more politically saleable--set of proposals.” Obama--wisely, in light of Clinton's failure--has laid out broad principles and a mandate for change, and has left it up to the House and Senate to pass a specific bill. Ezra Klein of our washingtonpost.com brother Website has a fantastic rundown of the various potential shapes the reform could take, and specifically how the so-called "public plan" features in each of them. Klein is a progressive, and admits to favoring the progressive option, but the post is admirable for its objectivity and fair-mindedness. Definitely give it a read.

A second premise: small businesses need health-care reform as much as anybody. Well, maybe not as much as the over-40-million uninsured Americans. (Then again, many of these work at or even own their small businesses!) The fact is, as we discussed last week, the current health-care system is anti-small business. Why? Because it relies primarily on employer-provided benefits, and because of the way in which employer-provided benefits work, it is far cheaper for big corporations to insure their workers than for small businesses to do so--creating either an extra expensive burden for small businesses that offer insurance, or a hiring disadvantage for small business that don't. In addition to all that, the current system sharply discourages entrepreneurially striking out on one's own. The point is: Change has to happen.

Now, a new article explains how and why reform could turn out to be a great thing for small businesses.

This morning, the Times reported on a new report from the group Small Business Majority (download it here). The report's conclusion? "The changes"--the reform proposals currently under consideration--"would be better for small employers than continuing the current system, which leaves many of those businesses struggling to afford health benefits for their workers." Among the potential "changes" is an employer mandate--a requirement that businesses provide health insurance for their workers.

Specifially, "the changes" would save small business a bundle. "The proposals under debate could save small businesses anywhere from $546 billion to $855 billion over the next decade. If nothing is done, on the other hand, the study says the health care bill for small businesses--estimated at $156 billion this year--would more than double, to $339 billion in 2018."

Where would the savings come from? The savings would come both through placing small businesses on a more level playing field with big corporations as far as employees' insurance is concerned, and through the much, much broader and drastic lowering of spending on health care that a more carefully overseen system is predicted to provide. (This is what Obama talked about yesterday in Green Bay, Wis.; and what this superlative New Yorker article discusses.)

In addition, remember: any system that gave all workers insurance--whether through an employer mandate or a public plan that anyone could opt into--would eliminate the advantage big corporations currently enjoy in terms of using superior insurance to lure superior talent to their employment ranks.

Some groups--the National Federation of Independent Business, for one (which, to its credit, has acknowledged the need for significant health-care reform)--will oppose any plan that mandates that small businesses provide health insurance to their employees. Even Obama, as we reported, has said that small businesses deserve special consideration where mandates are concerned; and in fact, though he is open to mandates generally, they were notably absent from the plan he offered during the presidential campaign.

So we're a bit more sanguine on how any final plan will affect small businesses, especially since we would think relevant elements of the SHOP proposal--which we laid out here--would be included.

This isn't just among the country's central domestic issues right now. Small businesses happen to lie at its very epicenter. Rest assured, this will not be the last lengthy post about health-care reform and small businesses that appears on BizBox.

The car dealers had their day at the Capitol today, the New York Times reports. These small business owners (some of them owning smaller business than others, to be sure) are being set loose by ailing car companies, mostly bankrupt Chrysler and bankrupt General Motors. Sen. Tom Udall (D-N.M.) had a typical reaction: “The dealers in these small towns are kind of the heart of the town. They sponsor the Little League; the big guy in town is usually the car dealer. I am worried about it.”

We've already covered the issue; check out our take here. Suffice to say that we're all for helping some of the businesses out...so long as it doesn't take away from the necessary help that all sorts of other small businesses desperately need.

Today is June 12. Monday is June 15. In between, you are assigned (in addition to our post from earlier on health-care reform):

What's in a name? Video (so no reading!) shows you techniques for remembering the names of the faces that you meet. [MSNBC]

Free morale. Be good to your employees while also being good to your bottom line. [OPEN Forum]

The balance beam. In the midst of work, we are in life. Rieva Lesonsky explains. [AllBusiness]

Do you believe in Magic? Magic Johnson, entrepreneur. [CNNMoney.com]

Mompreneurship. "It's the hardest thing you'll ever do," but, apparently, super-worth it. [Entrepreneur]

Facilitating feedback. How to get customers to tell you what they really think. [NYT]

As a follow-up to last's Friday post on health-care reform and small businesses, we thought we'd note that as a bill is actually lodged, it looks likely that a major source of the (major) funding will come from a tax on...employer-sponsored benefits. Specifically, the Washington Post reports, Sen. Max Baucus (D-Mont.), who chairs the crucial Finance Committee, is planning on taxing employer-provided benefits that exceed the $13,000 annual value of federal-employee benefits in order to help fund his legislation. (Benefits that are lower than or equal to federal-employee health benefits would remain tax-free.) This change would definitely hit some small business owners, and discourage others from offering or continuing to offer generous or any benefits (which in turn would create a hiring disadvantage for them).

Actually, what really set off our alarms is that Baucus is likely to make an exception for employer-provided benefits that exist as a result of agreements with unions. While there is certainly a logic to this exception, we can't help but worry that the practical effect of this would be to continue to allow big corporations--which, after all, are much more likely to have unionized workforces--to offer generous tax-free benefits.

So we're of two minds. The report we discussed last week is clear: effective health-care reform will, over several years/a decade/several decades, save small businesses hundreds of billions of dollars (and, if costs can be brought under control, it will save the American people trillions). However, in the short-term, such a plan would require many new billions in funding; and, at a time of heavy government borrowing and the need for continued government spending, some sort of tax does seem to be the logical way to raise those funds.

In fact, the tax on employer-provided benefits enjoys intellectually honest support across the political spectrum: here, for example, is liberal ex-Secretary of Labor Robert Reich advocating it; and, as he mentions, the idea was supported during the presidential campaign by none other than Republican nominee Sen. John McCain (R-Az.). Current budget director Peter Orszag has said the Obama administration is open to the tax.

A tax on employer-provided benefits that are over a certain level does not strike us as a dealbreaker, in other words. However, its inclusion would make it all the more important that any final plan address and help to rectify the unique disadvantages faced by small businesses in any health-care system that continues to be dominated by employer-provided insurance.

As enthusiasic proponents of cloud computing, we were delighted to learn about the Day in the Cloud Challenge, which is, naturally, sponsored by Google Apps--the search-engine company's extensive suit of cloud software. The game--it appears to be something like an online scavenger hunt--takes place next Wednesday, June 24. So, fun!

Meanwhile, the OPEN Forum runs a smart post on how to use various cloud storage systems, how much they cost, and the like. Definitely worth a read, because if you're not already on the cloud, you definitely should be.

The New York Times runs a good interview with Will Wright, the ingenious developer of The Sims computer game, on his management style. (For a great, longer read, check out The New Yorker's profile of Wright from 2006.)

The whole thing is worth a read--note especially his thoughts on dealing with failure and on making hiring decisions. But we thought we'd take a moment to highlight Wright's notion of employees' personal passions. "For a lot of people, their job and their position are not the relevant part of how they see themselves. They have an internal view of themselves, their career aspirations, the direction they want to go. The really important motivational stuff is more in their secret identity." It is by provoking and exploiting this that you can get the most out of your employees, Wright argues:

You want to spend a fair amount of time exploring their interests, what they do outside of work. Usually people always have some passion that really drives them.

And this to me is one of the important points of working collaboratively with other people — trying to get a sense of what is the one thing that makes their eyes light up, they get excited about and they won’t stop talking about. And if you can get a sense of what that is from somebody, and you can harness that, that’s going to have more impact on how they perform their job, how they relate to you, how you can convey a vision to them in a way that they get excited about it.

Generally, Wright's philosophy has much to do with treating his employees as adults:

A lot of the people I’ve managed — artists, programmers, producers — they don’t want to know just if they are doing a good job or not. They want to be pushed and challenged in their career.

So, if they feel like you are presenting things to them in such a way that, a year later, they are definitely going to be a better artist or a better programmer, then it really feels like a win-win.

The person this actually reminds us of is Phil Jackson, the coach of the Los Angeles Lakers who only last night won his record-setting tenth NBA Championship. Jackson is famous for being the coach who is best at handling superstars--he has coached Kobe Bryant, Shaquille O'Neal, Scottie Pippen, and that Michael Jordan fella. After the game last night, starting Lakers point guard Derek Fisher remarked that Jackson's strength is that he doesn't try to control his players, but rathers helps give them the tools for their own improvement and self-actualization. Makes sense to us. And, the cases of Will Wright and Phil Jackson, certainly seems to bring in the results.

One of the first functions that many business owners outsource is payroll. In fact, none other than the IRS recently reminded us that outsourcing payroll duties to third-party service providers can streamline business operations. Still, business owners are still ultimately responsible for paying federal tax liabilities associated with the practice.

Payroll taxes are called "trust fund" taxes because it's the obligation of employers to hold the employee’s money in trust until they deposit it with the government. Failure to do so in a timely manner can subject the business and the individuals involved to penalties and interest. And to make the point, the IRS cites the recent case of an Orlando man sentenced for a $181 million payroll-tax fraud.

Now substitute "plan assets" for "trust fund taxes" and "Department of Labor" for "Internal Revenue Service". The Department of Labor is the federal organization that has jurisdiction over the fiduciary aspects of retirement plans, and it takes the timely deposit of employees’ 401(k) contributions seriously.

Last year the DOL announced a proposed “safe harbor” rule for employee contributions to a "small" retirement plan (one with less that 100 participants). The DOL said that an employer will be deemed in compliance with the law if those amounts are deposited with the plan within seven business days of receipt or withholding. The DOL said in its announcement that the department would not accuse a plan sponsor of an ERISA violation while the proposal is being finalized if 401(k) contributions are deposited within the seven-day time limit.

In addition, the DOL requested information and data regarding a possible safe harbor for plans with 100 or more participants to enable it to evaluate the current contribution practices of these large employers.

In fact, delinquent depositing of employee 401(k) contributions usually gets discovered sooner than delinquent deposit of payroll taxes. Employees usually have no way of confirming payroll tax deposits, but with daily valuation 401(k) plans, employees can go online to check to see when their 401(k) contributions hit their accounts. Consistently late 401(k) deposits can be a red flag for an employer having financial problems.

And it’s a matter that the employer has to report at least once a year when the retirement plan’s annual Form 5500 is filed with the DOL. One of the required questions that the employer must answer is whether it failed to transmit to the plan any participant contributions within the required time period. If the employer has answered "no" , then it should not be surprised if there is a knock on the door by the DOL.

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.

A couple of months ago, we reported that venture capitalists were hoping that Congress would make venture capital-backed businesses eligible to take advantage of federal R&D seed money and tax credits that are allocated for small businesses. They specifically wanted their businesses to be able to access money from the Small Business Information Research (SBIR) program. Shortly after, Lloyd Chapman, head of the American Small Business League, wrote in to BizBox, furiously denouncing venture capitalists' efforts to get in on programs that he felt exist only for independent small businesses.

Well, the other day we received a press release from the ASBL, informing us that Rep. Sam Graves (R-Mo.) has introduced a bill, "Investing in Tomorrow's Technology Act," that for the purposes of SBIR and some other small-business programs, would alter the federal definition of small businesses to apply to companies owned mostly by venture capitalists--specifically, no single venture-capital firm would be permitted a greater than 50% stake for a company still to be considered "independently owned".

Needless to say, the ASBL is not pleased.

"For over two years, the [National Venture Capital Association] has hired some of the most powerful lobbying firms in Washington in an effort to quietly pass legislation that will allow its members to dominate federal contracting programs for small businesses, and firms owned by women and minorities," the ASBL says. It adds: "If the NVCA is successful, millions of legitimate small businesses could be forced to close their doors."

The ASBL asserts that the NVCA's lobbying has focused on President Barack Obama, House Speaker Nancy Pelosi (D-Ca.), and House Small Business Committee Chairperson Nydia Velazquez (D-N.Y.). (Chapman has expressed his displeasure with Obama before.)

The NVCA, meanwhile, has not been shy in advocating for the bill. One association member and Bethesda, Md.-based venture capitalist had this to say in testimony two weeks ago (which you can download here): the bill "will restore the ability of venture-backed companies to participate in the SBIR program, so that all of the most innovative small businesses can compete for these critical funding grants. At a time when our country needs to build new businesses, the venture capital industry is committed to working with the government to bring a steady stream of innovation and economic value to market."

And Rep. Graves had this to say in a release: "Opening up the SBIR program is exactly the kind of legislation Congress should be passing to help small businesses create new, good-paying jobs. Small businesses develop more patents per employee than large firms; investing in our small innovators is critical to our future.”

The ASBL offers an intriguing and not-unpersuasive explanation for what it calls the "sudden appearance" of this new bill, which goes to the heart of understanding the stakes of this battle over how the federal government defines small business. The group alleges that the bill is a response to a recently-introduced bill called the "Fairness and Transparency in Contracting Act".

We covered that piece of legislation--which Chapman actually helped to write--when Rep. Hank Johnson (D-Ga.) introduced it a few weeks ago. It would codify the federal definition of small business for contracting purposes, limiting it solely to "independently owned" companies--small subsidiaries of larger parent companies would not be eligible for the 23% of federal contracts that small businesses are legally mandated to receive (and currently do not receive).

So, two different bills: one applying to the SBIR program and its millions in R&D money; the other to federal contracting quotas and its millions (actually, billions) in contracting money. Yet both bills compete to define small business in very different ways. In other words, the stakes of the fight could not be larger. One side says that opening the programs up will only screw over truly small small businesses; the other side says that the country on a more macro level needs as many small businesses, more loosely defined, getting as much help as they can. We'll definitely be watching this one develop.

The New York Times runs an exceptionally smart article on the proper investment strategy the small business owner should follow in his personal life. The short answer is: a conservative one, with specific picks made by experts. The problem is that small business owners are used to calling all the shots and feeling like they are the best at whatever it is they do--a great entrepreneurial mindset, but a lousy one for investing, particularly when the small business owner in question is consumed with his or her own business and has little time to analyze the stock market, too.

More precisely, the article's advice is: "You take plenty of risk in your business; as an investor, you should keep it simple, spread your eggs among many baskets, keep fees and taxes low, and tilt the odds in your favor with indexed mutual funds and exchange traded funds." If you cannot completely stanch your entrepreneurial mindset from bleeding over from your business life to your personal-investing life, then try to use no more than 10% of your total investment money on gutsier plays.

The article provides a wealth of more specific advice on specific funds to look at, indexing strategies, ways to deal with taxes, and the like. The whole thing is well worth a read.

The big, single takeaway from the piece is a tried and true one: diversify, diversify, diversify. Usually when that advice is given in an investing context, it refers to the investing itself: spread your money among different industries, different types of investments, and so on. And to be sure, that is smart advice for the investing small business owner, too. Take another step back, though, and you see that a conservative investment strategy represents diversifying one's life. There are few riskier and high-stress things, after all, than starting and running your own business. Why not temper that with the safe bet where you can?

Finally, this article appears to herald the start of a new Times small-business blog, You're the Boss. Welcome to the party, guys!

Last week, we explored the paradox that while small-business demand for credit at traditional banks is down, demand at so-called Community Development Financial Institutions--small lenders that traditionally focus on low-income borrowers and neighborhoods--is up. Specifically, the CDFIs are seeing lots of "up-market" borrowers coming to them and asking for loans.

Well the news must have gotten the attention of someone in Washington, D.C., because earlier today none other than Federal Reserve Chairman Ben Bernanke gave a speech praising the CDFIs: "Without strong CDFIs, attracting investments and capital to rebuild and revitalize communities would be even more difficult. Economic recovery, like economic development, is a bottom-up as well as a top-down process. Through their work at the community level, CDFIs, together with other community development organizations, can help build a sustainable recovery for all of us." You can download the full speech, which Bernanke gave to the Global Financial Literacy Summit in Washington, here.

It is good to know that the CDFIs are attracting attention and respect from important and high places. They seem to be an increasingly valuable resource for small businesses, particulary small businesses in communities that have trouble getting what they need even in good times. They also tend to be small businesses themselves, with values that align with what you would think of as small-business values. "Community-based organizations such as CDFIs can play critical roles in these important undertakings because of their detailed knowledge of neighborhoods' economic needs and strengths and because of their commitment to their mission of community development," Bernanke said this morning. You couldn't come up with a better advertisement for CDFIs, and small businesses generally, if you tried.

Apparently unsatisfied with merely hurting business across the board, the current recession has decided that it is even going to make vacations more stressful and less enjoyable experiences, even as summer approachse. An AP story reports that a specific challenge faced by small businesses is that already-lean workforces may have additional trouble bearing the burden of having too many employees out at any given time. And Entrepreneur notes that vacations are stressful not only for the employer, but also for the employee (and, in the case of small businesses, the employer as well), who has to deal with the stress of missing work in this increasingly cut-throat business environment.

As to the former question, of how to ensure business goes on while still allowing vacations, the recommendation appears to be: be flexibile, and don't institute cutbacks. It's one thing if you want to do away with half-day summer Fridays, which were always a little decadent to begin with. But don't cut back vacation days; and make it clear that vacation days are there to be enjoyed, not given up, even now. Which is not to say that you can or should tolerate a critical mass of your employees being out on a given day: this is why there are vacation policies, advanced notification, and the like. And it's also not to say that, if something "once-in-a-lifetime" suddenly comes up for an employee, you shouldn't let them take off work: you should. Morale is important.

Meanwhile, Entrepreneur's report has numbers to back up something that makes sense, but that you probably don't think about much: not only can work intrude on vacations, but specifically, the day before a vacation and the day after one are incredibly stressful. The post has some recommendations on how to alleviate this, which, rest assured, we ourselves will be following when we next take a few days off.

We wrote about this once several months ago, but the issue is so important that when a new, good article on it comes along, we feel compelled to flag it. The issue is maintaining and improving your business's solid credit rating--which can alternately be the skeleton key to all sorts of favorable loans, or the albatross you wear around your neck until you fall over and can't get back up (how's that for an elaborate metaphor?).

The new article, meanwhile, appears on a blog called FastUpFront. We recommend you read the whole thing. Briefly, though, its suggestions include: separate your business credit rating from your personal credit rating; emphasize good cash flow (so you'll always be able to pay down random, nagging debts); and always try to think about how your transactions will affect your credit score. This can include going out of your way, say, to conduct transactions with counterparties whom you know report to ratings agencies, and to make triply sure that all your payments are on-time and in-full with them. The point is that you're allowed to think of your credit rating as more than just an indicator of your business, but as a business goal in and of itself. It's certainly important enough.

"Green shoots" is the buzz phrase of this week: the idea being that we are finally beginning to see some new growth (maybe it's all the rain!) among the economic wreckage of the past several months. The stock market is way up this year (although in what other direction could it possibly have gone?). Perhaps more importantly, the corporate lending climate has eased up, as evidenced in the narrowing spread between government and corporate bond rates. Even small businesses seem to sense that the end to the recession is somewhere around some not-too-distant corner, and are beginning to prepare accordingly, as the AP reports.

But, as always, there are caveats! For one thing, as Fortune reports, credit is still nowhere near as available for small businesses as it would be in a post-recession environment, and many small businesses report plans to continue cutting jobs.

Meanwhile, OPEN Forum runs an admirably clear-headed post cautioning small business owners to hold back on the champagne-popping and continue to bear down and exercise vigilance. Specifically, even if things are improving it remains a good idea to keep value and discounting in mind when trying to peddle your goods and services to customers, and to try to keep costs down wherever possible; and doing these things will remain a good idea even after the recession has more clearly stalled and abated. In fact, as we argued last week, no matter when the recession ends it provides a great opportunity for small businesses to alter themselves, slim down, and make themselves into a better company--both to survive what remains of the recession and to thrive afterwards.

A different OPEN Forum post, incidentally, asks how much of the recession was based in psychology. On the one hand, even the most coldly analytical economist will tell you that the business cycle has a large basis in the psychologies of the market actors. On the other hand, there were clearly structural economic reasons for what has transpired, and certain structural economic factors are going to need to change for people's psychology to improve.

Best to say that economic forces and people's thinking feed off of each other, and that both still have a long way to go--even if those green shoots aren't an aberration.

The New York Times runs an article on the continuing problem of banks and credit card companies slashing credit limits on small businesses. (For the best indictment of this practice that you'll ever read, go read the piece that the famous "Anonymous Banker" wrote on the subject for BizBox.)

The cutting of credit-card lines, in particular, is made all the more worse by the general credit crunch, which has led many small business owners to rely increasingly on small business cards. (Our sponsor, American Express OPEN, is one such provider.)

And making all that yet worse still is that fact that the recently passed credit-card reform law for all intents and purposes excluded small business owners and small busiuness cards.

Some, of course, have said that it would be counterproductive to regulate credit cards. Do please tell that to the small businesses who now have even less credit available to them.

We've discussed bartering before. The practice of procuring goods and services that your business needs not through paying for them but through swapping your own goods and services for them is a little bizarre, and certainly symptomatic of the lousy economic times. But that doesn't mean it's a bad idea--in many instances, it's a decidedly good one, a way to keep your business running by spending a bit less money (and assuming a lot less credit).

CNNMoney reports on a type of service that small businesses around the country have began to barter for: health care. Here, small businesses that would like to offer health benefits to employees but cannot afford to instead barter with small businesses in the health-care industry--doctors offices, dentists, chiropractors, whatever--setting them up with whatever they do (IT, dry-cleaning, whatever) in exchange for some health services for employees and owners.

On the one hand, this is obviously a heartwarming, if that's the word, tale. How nice that even in these times, small businesses are finding a way to provide their employees with health benefits, and in fact are doing so by helping out small businesses in the health-care industry in the process.

But on the other hand, it's kind of despicable that it's come to this. Why should it be so difficult--yes, even during downturns--for small businesses to give their employees health insurance? Especially when it's easier for bigger companies to do so?

Washington could start by taking a look at the principles articulated in SHOP as it crafts health-care reform this summer. But perhaps just as importantly, our political leaders could take note of the fact that small businesses are resorting to bartering to get health care for their employees--when they're not simply not offering it altogether. That is an unjust and untenable state of affairs.

It's the last weekend of spring. Enjoy. And go Tiger!

The upside to the credit (card) crunch. Maybe it's a good thing that you can borrow less that way. [You're The Boss]

Factor this. The advantages and drawbacks of factoring, a quick financing method. (Accounts receivable becomes collateral.) [OPEN Forum]

B2B speed-dating. Well, this is one way to land contracts for your business. [Fortune]

Firing fail-safes. 6 questions to ask yourself before you lay an employee of. [Selling To Consumers]

"Recession Lead To More People Buying Seeds" This probably doesn't have to do with small businesses per se (unless it's a small business that sells seeds), but what a great recession trend story! [WaPo]

An article this morning really got us thinking about the government's stimulus plan. The piece, published in the New York Times, applies some important analytical pressure to a premise we (and most everyone else) has largely taken for granted: that smartly targeted government stimulus spending can spur innovation. The article acknowledges that more purely libertarian, pro-free market critics have always taken issue with such a notion, but that's simply their dogma talking (which doesn't mean they are wrong, but it does mean that those who don't share their ideology aren't going to leap onboard). For the rest of us, should we be skeptical that government spending can accomplish (or efficiently encourage the accomplishment of) the goal of innovation? Specifically where start-ups and other sorts of small businesses are concerned?

The article reports on a meeting held north of San Francisco to discuss the burgeoning field of "innovation policy"--echoes with the "industrial policy" of yore deliberate. "If the reach of innovation policy is broad, the attendees agreed, it is best done with a lighter touch than industrial policies of the past, which often focused on specific companies for government support. They used metaphors like 'impresario' and 'orchestra conductor' to describe government’s role. The ideal, they said, is 'stewardship,' not command and control."

You don't have to buy into rigid free-market orthodoxy to believe that expert private actors are going to be better at specifically allocating research dollars than, to use common pro-market terminology, some bureaucrats in Washington, D.C. Or to believe that the market will in the long (and even medium, and, sometimes, short) run prove better at deciding which innovations have real marketable potential and which do not. In that light, is innovation policy wise? How should the government spend money with minimal intrusion on the natural workings of the market?

We certainly agree with the "lighter touch" philosophy. And we'd be even more specific: government should strive to use stimulus spending in order to encourage innovation only where innovation will accomplish a legitimate social goal that, at the moment, does not make economic sense. So right now, perhaps (and this could be completely untrue--this is just an example), retrofitting tall office buildings in order to "green" them might be economically unfeasible. If this were so, it might be wise for the government to direct stimulus spending to competing entrepreneurs who are seeking to improve such technology--especialy so that, one day, it does make economic sense without government subsidy.

But the government shouldn't be aiming to improve innovation in the arena of, say, portable mp3 players--one field that developers have, let us say, figured out how to monetize by now. Innovation there will continue of its own accord, and will survive solely on current profits. The iPod is obviously a more stark example: fill in subtler ones.

Thinking about innovation policy in this way makes government decisions a lot easier. Is something a good idea for society? Could you go purchase that something right now at an economically feasible cost? If yes, then that field probably doesn't need the taxpayers' money. If no, then improving that area sounds like as good a use of that money as we could think of.

Or, we could just use the stimulus money to fight forest fires!

John Tozzi of The New Entrepreneur flags a very interesting report on the current state of small-business credit (which you can download and read here).

Much of its findings contain things we clearly already know: for example, it should be no surprise to regular readers that smaller lenders are probably the better way to go if you're a small business looking to borrow money. Nor that loan applicants should expect an extensive look into their backgrounds and finances as well as generally conservative lending standards.

The report does note that certain metrics, such as cash flow, do put the smallest of small businesses--think sole proprietorships and companies with under five employees--in a very tricky position if they are seeking conventional ways for obtaining credit. Attention must be paid to this issue, especially given that the new ARC microlending program--if it ever gets off the ground--is geared not towards helping the smallest of small businesses obtain genuine credit but rather towards enabling all small businesses to meet pre-existing bank debts.

The most interesting part of the report, to us, was its findings concerning Small Business Administration loans. "Some feel that the SBA loan program requirements, lending process and related efforts are too burdensome," the report says. "The added costs and effort deter these institutions from actively promoting SBA loans. A smaller subset," it continues, "views SBA loans more favorably. Looking beyond the added effort, they see SBA lending as an opportunity, fulfilling a need that other financial institutions rejected." It goes on to suggest that prospective small-business borrowers interested in SBA loans ought to conduct due diligence to see which lending institutions have a track record of making such loans, which is certainly sensible advice.

The fact is, though, SBA loans are already much less expensive now that fees have been (temporarily) waived; and they will soon get much easier, too, as the SBA uses its stimulus money to beef up its lending-program infrastructure. If some small lenders are still skeptical, then we have to begin to wonder what is the point of having the complex SBA program--in which private institutions make the loans, only the government backs varying percentages of them once they are made--in the first place? Isn't there an easier way for the federal government to do its part to boost the flow of credit to small businesses?

No, this isn't about how putting is everything--a lesson Tiger Woods, who kept claiming he was hitting the ball better than his score was reflecting, certainly learned all too well this past weekend over at Long Island's Bethpage Black course. Rather, this lesson--flagged for us by our contributor Jerry Kalish--concerns the Open's Thursday ticket policy. Thursday, in case you were following, was all but completely rained out. However, as this golf blog reports, Thursday tickets were neither refunded nor honored on Friday (during which time most golfers completed their first rounds). "That's right, if you traveled to Bethpage to watch action on Thursday, you will not be allowed in another day because one player had hit one shot," the blog reports. "Hey, that's policy....You might have seen Tiger play six holes, but that is all you'll see."

Now, in fairness, we're not sure that honoring Thursday tickets on Friday would have made a whole heap of sense: after all, Friday was presumably sold out already by people who had purchased, you know, Friday tickets. And the Open did reportedly honor Thursday tickets to people who showed up today, during which the final round was played (which strikes us as unfair to Sunday ticket-holders, who presumably bought those tickets--perhaps paying extra for them--in expectation of watching the final round).

But something about this strikes us (and struck Jerry) as fishy. No one blames the Open for the weather, of course, but surely there would have been more nimble ways to respond to it: giving refunds (or partial refunds), discounting on future days' tickets, spreading Thursday holders out over the proceeding few days.

The lesson for your business, meanwhile, is to assume the worst, and plan something that is unlikely not to leave people blaming you. The PGA followed the first bit of this advice: they do indeed have a specific policy for this sort of thing, which is exactly what they implemented. The problem isn't that they didn't have a policy. It's that their policy sucks. Make your contingency policy something that doesn't suck. After all, wouldn't you rather have your customers blaming something outside of your control--like the weather?

Last month, Marc Tracy, my leader (editorially speaking), touched on the issue of worker classification, and efforts to make it less complicated for business owners to hire someone as an independent contractor rather than an employee. I wanted to discuss this because several signs indicate that misclassification enforcement is on the rise. (My guess why? Blame the economy. Governments need revenue, and so they're cracking down on everything from jaywalking to, well, employee misclassification.)

It’s a cost issue, of course, for the business owner, and a payroll tax issue for the IRS. I’ve written about this matter before for this blog in November of last year ("What’s In A Name? Sometimes A Lot") and for my own Retirement Plan Blog this past January ("Independent Contractor Or Employee? Employee Classification Still A High Priority Enforcement Matter").

And so here I am again revisiting the same topic. Why? Because tax advisors have been reporting that in addition to the IRS, several states are stepping up their audit and enforcement activities of small businesses to determine if workers are being properly classified. And it’s not just a payroll tax matter for the states, by the way: it’s also about getting employers to pay employment tax on workers the state considers employees.

Here are some recent sightings:

This past January, Attorney Rush Nigot told us that the state of Iowa is planning to increase anti-contractor misclassification efforts.

And this past April, Attorney Joseph Dang in his San Diego Small Business Law Blog wrote about both the feds and the state of California’s enforcement activities.

(Both attorneys do an excellent job of translating legal issues affecting small business into practical information, and should be part of your regular reads.)

And now in my own state of Illinois, CPAs, Sikich LLP, report that they have noticed a significant increase in the number of random small business audits being conducted by the Illinois Department of Employment Security, the state agency that regulates unemployment benefits.

So it’s no large leap in logic to assume that because of the economy, the various states are taking stricter positions to beef up employment taxes, in order to pay for increased unemployment benefits. And it’s also known that these state agencies often share information with the IRS, which could lead to additional taxes and penalties if a worker is misclassified.

What to do? This is another one of those "kids, don't try this at home" matters. Consult a qualified tax advisor, because a mistake can be very expensive. In the meantime, check out the IRS’s updated online resource page, Independent Contractor (Self-Employed) or Employee? The page includes links to how to get a determination from the IRS on a worker’s status, and how to get tax relief.

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.

An excellent Washington Post article demonstrates just how constricting the credit crunch has been on individuals' (and therefore small business owners') credit scores. In essence, banks are asking for higher scores, even while everything that could cause scores to fall has occurred. The result? "Credit is less available to both low-risk and high-risk consumers at a time when they--and the economy--need it the most." (We covered the huge importance of credit scores for small business owners last week.)

It's easy to understand why having a higher credit score is more important than ever: there's less credit available, and so lenders are that much more picky. That's the simple part.

More complicated, and also troubling and, frankly, unfair, is the fact that some credit scores are falling, and in a manner that does not necessarily reflect borrowers' actual creditworthiness.

The main problem is that your credit score can be adversely affected if you are utilizing more/most of your credit limit, and borrowers are increasingly doing just that, both because of the poor economic times, and--and this is the really unfair part--because credit limits are being slashed everywhere you look. In other words, if your credit limit for your business was $20,000 and you were using $10,000, your credit score was going to be fine. But now, maybe you're using $11,000 of it because times are so bad, and meanwhile the bank has cut your limit to $13,000 due to their problems, not yours. So even though you are the same reliable and solvent borrower, you are using a much higher percentage of your limit, causing your credit score to go down, in turn causing lenders to be more skeptical of extending you credit...and the cycle continues to repeat itself, downward.

The article goes on from there, describing a bizarre and byzantine system of competing personal-credit rating agencies and their competing scores, some of which are official and some of which are educational. It only gets more Kafka-esque from there.

It seems not a little inadequate, to us, that a system so important to the very livelihoods of so many--the credit-score system, which affects both personal and, typically, small-business borrowing--should have so little credibility, and be subject to so many arbitrary gusts, and be run with apparently so little official regulation. As we put together the rest of the financial system, it seems to us that this little corner--or, rather, back alley--ought not to escape the makeover everyone else is getting.

Entrepreneur's Daily Dose flags an important new study from the Department of Health and Human Services. It found that health-care costs are rising dramatically, and across-the-board: deductibles, co-payments, and out-of-pocket expenses are all up. And the result is, as the Obama administration's reform Website's motto has it, "Americans are paying MORE but getting LESS."

Specifically, citing a Kaiser Family Foundation study, the report relays that employer-sponsored health insurance premiums have doubled...just since 2000. That's three times faster than wages have risen.

This has been another episode of Health-care Reform Is a Small-business Issue.

We've discussed before the paradox that while you probably are looking to cut payroll costs--this is, after all, where most small businesses' spending gets swallowed up the most--you are also probably looking not to fire anyone, or to minimize how many people you have to fire. Partly, of course, this is for sentimental (which is not to say unimportant!) reasons: in small businesses especially, employees can be like family, and no one wants family to get laid off, much less to do it themselves. But it's also wise business practice, especially when you remember that the recession won't last forever, and that it will be essential to burst out of the starting gate during those crucial few months when the economic tide is turning--something that will be much more difficult if your workforce is severely depleted because of recession-era spending cuts.

Recently, the New York Times informed us of an innovative way to hold on to employees but at the same time cut back on how much they work for you, and therefore how much you have to pay them: a sort of best-of-both-worlds type of deal. And a second valuable recent Times article discusses how to keep your full-time employees motivated and interested during an effectively part-time work schedule.

One article highlights work-sharing programs, a formal arrangement under which employers reduce employees' hours, usually by 20% to 40%, and concommitantly reduce their pay (while still, usually, maintaining full benefits). The state, meanwhile, picks up the slack in the form of limited unemployment checks. Employers get to keep trained workers; workers can come close to breaking even, once you factor in reduced income tax and that extra cash from the state; and the state has fewer failed businesses, completely (as opposed to partially) unemployed residents, and other drags on society and the economy. Win-win-win.

As the (genuinely fabulous) article explains, only a small fraction of eligible companies take advantage of such programs, mainly due to inertia and, simply, ignorance of them (which is partly the fault of some of the states that offer them, which have at times been coy about publicizing them). And not all states do offer them. "I frankly don’t understand why there aren’t more states that participate in this program,” says the Massachusetts Labor Secretary.

So consider this post to be our part in combating that ignorance!

Meanwhile, the chief lesson of this article is that idle hands are morale-killers. "For many employers, of course, the solution to dealing with a lull in the workload is to downsize--either permanently or temporarily," the piece observes. "But other companies want to keep their work forces at full strength in readiness for an upturn." It continues: "The challenge of filling down time isn’t small. While frenetic 80-hour workweeks can certainly take their toll, staring into an abyss of free time can also damage employee morale."

It then reports on various bosses who have done all manner of things--a listening tour, a business-related book club, and even, yes, paid time off--in order to avoid bored, thumb-twiddling employees in the office.

We'll leave you with a collection of quotes from the first article, each from different business owners or employee managers. Remember, these folks have all avoided outright downsizing by taking advantage of those state partial-employment programs.

“The alternative would have been to lay off three to seven workers, but that would mean that when things become busier, I’d run the risk of not having the trained people I need.”

“Just the ability to hang on to people in tough times and not force them out the door is good for morale."

“The great thing about this program is you’re not decimating your company. Our company is not broken. The economy is broken.”

Yet one more reason--as if the sentimental ones weren't enough--to do your darndest to hold on to employees during these admittedly difficult times.

In this third installment about what makes great entrepreneurs who build something meaningful and substantial, we continue analyzing the nine key personality traits that I believe increase your chances of success: big dreamer, natural leader and decision-maker, obsessive passion and drive, macro-manager, rational optimist, healthy fear of failure, little fear of risk, controlling but not freakish and disciplined personal life.

In this column we find out if you are a natural leader and decision-maker. In my experience, these are people who like being in charge, enjoy the challenge of motivating others and serving as key cheerleader, understand how to manage by incentive and good communication rather than fear, don’t dwell too long on decision,s and have a strong sense of organization. Let’s take these one by one.

Likes being in charge. I used to think, “Who doesn’t like being in charge?” Then I discovered that many people in fact do not appreciate the pressure and potential rejection involved in running anything. In my case, I learned that I enjoy leading the show, but that doing so also puts you “out there” for criticism. Until recently my firm had ten partners, but I was the only one with ownership in the firm, and served as Managing Partner. This gave me the power to make decisions. However, in many cases it was impossible to make a decision without someone being disappointed. But in all, I know I would rather be the one making that decision.

Enjoys challenge of motivating people. There is nothing more fulfilling for me than to see one of my people really rise to a project or a task in part thanks to my efforts at encouraging them to feel a sense of ownership in it. But again, there is the dark side: that moment where someone you thought was coming along disappoints, or, worse, sabotages something. But if you’re a great leader you still come back for more of the good side.

Serves as key cheerleader. You realize that your people take their cue from you and you like that (most of the time). If you’re a little down, people will whisper, “What’s wrong with him today?” Then they will wonder whether they did something wrong or whether something is wrong with the business, even if the only thing bothering you is you had a silly disagreement with your spouse, or you stubbed your toe. So you show up every day appearing enthused and supportive, regardless of your actual mood. I admit to failing at times on this one. But I can also rise to the occasion. We had a dinner for all 40 people in my firm about a year ago and I gave an impassioned speech about how important our mission is and how proud I am of each and every one of them. People talked about it for a long time after (I think in a good way!).

Manages by incentive and communication, not fear. Great leaders are not the ones who yell and scream and scare the bejesus out of people, firing someone, then rehiring them, etc. In my 23 years of law practice I can remember maybe two or three times that I raised my voice. And although I did not share equity with my partners, I never made a decision affecting them without insisting on their input. Good management is not about sharing power, it’s about good communication. If you truly listen to your people and take their concerns into account, the appreciation will come full circle. That does not mean everything has to go their way; but when it doesn’t, make sure they understand why. Fear may result in compliance, but it mya also lead to resistance (read: current events in Iran). Reward the good and listen.

Makes decisions efficiently. I must have to make several dozen different decisions a day in running my firm. Many are almost automatic at this point and consistent with situations I have dealt with in the past. Some are brand-new and require a little thought. I never rush into a decision, but I do not dwell on the process, either. The great entrepreneurs know that business moves at light-speed and that good decisions need to be made as quickly as possible. Now, some also say you should never look back, but there I disagree. After a decision is made, monitor its implementation so that if problems occur you can learn from them.

Has a strong sense of organization. This simply means being a good planner and organizer. Thinking ahead is critical to good leadership. This is often what keeps great entrepreneurs (well, anyway, me) up at night: playing all the “what ifs” in your head and determining how to deal with them. But your company should have a clear structure in which each person clearly understands his or her role and responsibilities.

Next time: do you have the obsessive power and drive to succeed?

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.

Well, the Small Business Administration's America's Recovery Capital microlending program--the one in which "viable" small businesses can apply for interest-free bank loans of up to $35,000, to be fully backed by the government, in order to pay back pre-existing debt--has been out for a bit over a week.

On the one hand, CNNMoney reports, 42 lenders in 21 states have already okayed 74 loans, totaling over $2 million, under the program. On the other hand, as Entrepreneur points out, the low interest banks would receive from the government for making these loans, as well as the risk of a default they'd still be left responsible for, has dissuaded many banks from participating in the program. This is a phenomenon we suggested was occuring and would continue to occur.

We don't have much more to add to the two articles and our previous post on the subject (which pointed out that private lenders appear not to have that great an incentive to participate in the program, and that federal small-business lending programs that require the cooperation of private actors have proved troublesome before). Except to say that the SBA's continued cheeriness on the subject of ARC--"The program will take a bit to ramp up, and that's expected, but we've also heard that many lenders are ready to begin participating," said the agency's press secretary--is a little bit troubling: they need to reckon with the reality of potential massive lender refusal to participate. But then again, we'll wait for the stats of more than a week before we render a real judgment of the program's success or failure.

For as long as we can remember, we've been saying that discounting is an absolutely essential part of a recession-survival strategy. Does it cut your profit margins? Sure. But profit margins aren't worth the paper you calculate them on if you don't actually sell what you're trying to sell, and in tough times discounting is the only way to make sure that you are.

But is there too much of a good thing--in this case, discounting? The New York Times examines the predicament that many chain restaurants--which, on an individual level, tend to be owned by small franchisees, not big corporations--find themselves in as they have drastically cut prices amid the lower spending climate and the pricing war it has sparked. Get dinner for 2 for $20 at Applebee's; 2 entrees for the price of one at Ruby Tuesday and $6 entrees at Chili's.

The problem, according to some, isn't that the discounting is too drastic and is therefore destroying current profit margins. (Some franchisees have complained about this, too). The way we see it, you need less money to get by right now, as everything is cheaper; and besides, profit margins used to be incredibly high, and you're still making a ton of profit, if you're one of these restaurants, off of things like drinks (soft and especially hard). Besides, in good and lean times alike, great deals can be counted on to get more people in the door, where they will invariably proceed to purchase non-discounted items along with discounted ones. So for the time being, we suspect that you can get away with such sharp discounting, and that it may even be a wise strategy.

But "for the time being" is the key. The concern, according to the Times, is that the discounting now will leave these restaurants in an extremely unfavorable position after the recession abates. Now that prices are low, the thinking goes, it's going to be that much more difficult to bring them back up once a post-recession economic climate justifies and even requires doing so. On top of that, there is the legitimate worry that the discounting will do serious damage to these institutions' brands. If Chili's entrees can be sold, even at a discount, for only $7, then what does that say about Chili's quality? (Or any of the others? We have no specific beef with Chili's!)

The article is illuminating on its own terms, but it also opens up onto a much broader and more important subject: the fact that, even as you struggle to survive the lingering recession, it is time to start thinking about how you are going to proceed and get back to business as usual as the recession (slowly) fades away. We talk about this a lot when we talk about trying to avoid laying off employees. But this dynamic is relevant to all facets of your business. It is increasingly something you need to keep at the top of your agenda.

"The old role of producer and consumer in the media environment, largely unchanged from Gutenberg through cable television--someone in the center has one message [that] they want to replicate: that itself is what's breaking. Every time a new consumer is added to the 21st-century media landscape, a new producer is as well."

So says Clay Shirky, author of Here Comes Everybody (which we've read, and highly recommend), in conversation with James Ledbetter, a friend of the site and editor of our corporate-brother publication, The Big Money.

We've embedded an excerpt of the conversation below, and we definitely think you'll enjoy it. Meanwhile, one thing to consider is this: the new, social media-crafted landscape that Shirky describes is one in which, fundamentally, customers' beefs with businesses come to light much faster, and in a much bigger way. In turn, this means that businesses are increasingly going to need to respond to such complaints much more quickly and effectively if they are going to keep up with everyone else. And it is here that small businesses' advantage in this new landscape is made apparent: they are nimbler, quicker on their feet, easier to adapt and to change.

So get on Twitter, or Facebook, or whatever, and connect with your customers. The famous sign says, "If you like our service, tell others; if you don't, tell us." Don't look now, but the sentiment behind that sign was just made 10,000 times more potent.

UPDATE: Don't miss this New York Times piece on European companies' innovative use of social media to get their advertising messages out.

Small businesses took another step towards the center of the health-care reform debate Wednesday, with key senators disagreeing over whether an insurance mandate--basically, requiring Americans to have health insurance (much as drivers in many states are required to have auto insurance)--might erode employer-sponsored insurance and, what's more, disadvantage small businesses.

The key issue is this: any mandate program, which would involve government subsidies to the less-well-off, would all but demand the levying of penalties on employers who don't offer health insurance to their employees. In fact, it is precisely those penalties that would help avoid the erosion of employer-sponsored insurance--itself a crucial political goal, since it was the widely perceived threatening of such insurance that is believed to have derailed the previous major push for health-care reform, in 1993.

But penalties would fall on those businesses that don't provide insurance. And, given the basic statistics, and the way in which the current health-care system fundamentally disadvantages small businesses, that means that the penalties would fall disproportionately on small businesses. Which is obviously unfair.

So what's the solution? Well, the immediate, obvious answer would be to exempt small businesses from any requirement. No less than President Obama said he would be open to such an exemption, as we noted a couple weeks ago (and as today's article reiterates). House Democrats have said their bill will exempt some small businesses. Sen. Max Baucus (D-Mont.), who from his perch as Finance Committee Chair may be the single most important legislator when it comes to health-care reform, suggested tax credits rather than outright exemption, saying of the latter option, "We talked about it. But how much sense does that really make?”

We hate to say it, but he does have a point. Treating small businesses the same as big businesses in terms of requiring insurance is clearly unfair. But simply exempting them may add unacceptable strain to what would be the government's already-daunting obligations to the otherwise-uninsured, whether they take the form of subsidies or some sort of public-plan option. It might even have the perverse effect of decreasing the number of small businesses that offer insurance, which could in turn give bigger employers that much larger of an advantage in attracting top talent.

It seems like a circle to be squared. And a circle that needs to be squared, if we want to save small businesses billions and billions of dollars.

First over at his old Entrepreneurial Agenda blog, and now at his new one, You're The Boss, Robb Mandelbaum has done a stellar job cataloguing how the recent credit-card reform law passed small businesses and small-business cards over. (Time to note that our sponsor is American Express OPEN.) The bill instituted a number of protections for consumers: against sudden interest rate hikes and exorbitant fees, for example. But the law only applies to personal cards. Yesterday, Mandelbaum filed a great, lengthy, heavily-sourced report that attempts to conduct the forensic, crime-scene analysis: what did small businesses ever do to Congress to make them so ignored when crunch-time came? The question seems more stark when we recall that the final bill passed the Senate 90-5.

The more specific question, which we mentioned at the time, is: who or what killed Sen. Mary Landrieu's amendment? Landrieu (D-La.), recall, is the chair of the Small Business & Entrepreneurship Committee, and she did a great job trying to look out for small business people: her amendment would have extended the protections to corporate cards tied to businesses with under 50 employees, as well as to personal cards used for business purposes (where the business, again, has under 50 employees). The amendment also would have exempted cards with $50,000, not $25,000, limits. Yet that bill was killed in committee--the Senate Banking Committee. And moreover, its killers were bipartisan--meaning one should immediately start to look to both ranking member Richard Shelby (R-Ala.) and Chairman Christopher Dodd (D-Conn.)

Broadly speaking, according to Mandelbaum, Republicans had significant problems with expanding the protections to so many additional cards--less, they claim, because they believed such an expansion would be an out-and-out bad thing and more because its potential repercussions had not been sufficiently investigated. As for Democrats, while certain of them may have had the same objection, mainly they wanted to pass the bill's other provisions--the one that are now law--without risking losing substantial GOP support.

They say there are two things where people don't want to know how they're made: sausages and laws. Mandelbaum has some great additional reporting on the particular process behind Landrieu's failed sausage, and you should definitely check it out.

But suffice to say that though the law does provide for the Federal Reserve to study the issue of expansion, Mandelbaum is pessimistic on such an expansion being enacted anytime soon.

And suffice to say that, er, that's bulls**t.

It's summer, which means...lots of rain? Apparently. While you're inside, here are some things to keep you occupied.

Spitzer on small businesses. New York's former governor reports from the small-business frontlines, where big banks that have received billions in taxpayer money have cut credit. [Huffington Post]

How much $$$ is enough? An attempt at an answer. [You're The Boss]

Make employees happy, don't pay taxes. A valuable list of ten employee benefits that neither they nor you are taxed on. [OPEN Forum]

The biofuel gold rush. Renewable energy is the new hot small-business industry. [Entrepreneur]

Networking made easy. Are you the type reluctant to do what it takes to network successfully? Here are some baby steps you can start right away. [NYT]

Will the stimulus stimulate? The public is no longer so sure. [WaPo]

The Entre-Boomers. Otherwise known as Baby Boomers who are entrepreneurs. [The Entrepreneurial Mind]

Via Bloomberg comes the news that General Electric is establishing a big new research center in the Detroit suburbs. The Advanced Manufacturing and Software Technology Center will investigate potential innovations in the areas of health-care, software, and even wind energy.

...So why do we care? GE, after all, is precisely no one's idea of a small business. But the notion that the Midwest can be remade from its industrial history into a post-industrial, ideas-based economy--remember Youngstown, Ohio?--is one that has captured our imagination, as it is small businesses and frisky entrepreneurs who will play an integral part in that process. Indeed, GE is quite explicit that it is seeking to take advantage of brilliant-but-laid-off scientists and engineers formerly of the auto industry. In fact, we've written before about filling up Detroit's empty tank. Now, who knows what types of small businesses will sprout up in Oakland County, Michigan to buttress and complement this research center? Who knows what endeavors will be spun off from the center, and from the innovations it produces?

Detroit used to be a world center of innovation. But things calcified, as they tend to do, and then grew increasingly obsolete, as they also tend to do, and now it is hurting. So we are cheered by GE's move--it represents a great first step back for a once-mighty metropolis. And we are hopeful that as Detroit's rejuvenation continues, small businesses will star at center stage.

Can you pay them? Certainly it's more difficult now than ever before. To that end, OPEN Forum recently ran a nice post outlining a basic checklist of what you should look to do in the event that you're having trouble making payments, from attempting to renegotiate your terms to declaring bankruptcy, and everything in between. Definitely worth a read for the small business owner struggling to make payments, or fearful of soon being in that position.

One option that post doesn't mention, however, is one we've discussed several times: bartering! It may sound a little weird and unorthodox--maybe even desperate--but what's that line about desperate times? Bartering keeps your precious cash flow safe from harm, and might even turn out to be more beneficial to your vendor.

Fortune Small Business runs a nice feature on small-business bartering, concluding, "It's a cash preservation tool, something that's especially useful in a tough economy. It can also help move unsold inventory or put idled staff to work. Done right, bartering can even drive new cash business." An important thing to remember is that if some business is willing to take your good or service as payment for a debt, that same business might also be willing to give you actual business for that same good or service in the future.

Meanwhile, and along similar lines, OPEN Forum also advises you on how to pay back troubled loans to banks. Once again, their first advice is to try to renegotiate terms--times are such that banks are more than anything terrified of defaults (they, too, have cash flow problems you might say!), so if you can convince them that more lenient terms are the only way to avoid that outcome, they will probably be amenable. But the post's chief advice is this: don't wait! At the first sign of trouble, alert your lender. They will appreciate the advance notice, and it can be a nice building block on the path to a really productive, trusting relationship with your bank.

You're The Boss points to the National Federation of Independent Business's most recent monthly numbers on the percentage of entrepreneurs who believe that the next three months are a "Good Time to Expand". Recently, the figure has risen. However, the post's author concludes: "the percentages over the last few months are still in very low territory compared to where they have been historically. Clearly the recession is taking its toll on the outlook of small-business owners."

But is this historically low outlook really the best indicator of the prospects for entrepreneurial growth? Not necessarily, John Tozzi of The New Entrepreneur might say; and were he to say it, we would agree with him. Tozzi highlights an intriguing statistic produced by none other than the U.S. Census Bureau: that between 2006 and 2007, the U.S. added over one million additional non-employee (which is to say, single-person) businesses. These businesses actually comprise a not-insignificant space in the economic landscape: by 2007, there were 21.7 million of them--19.1 million sole proprietorships, 1.4 million corporations, and 1.2 million partnerships. As you'd expect, the vast majority of these businesses are unincorporated individuals. Their total 2007 revenue totaled nearly a trillion dollars, which, Tozzi notes, is equal to nearly 7% of GDP.

Of course, these are relatively old numbers. But Tozzi makes a compelling point: "I think the long-term trend here is clear: More people working for themselves instead of (or in addition to) being employees. My gut sense is the recession is creating even more entrepreneurs as laid off workers go into business for themselves." We heartily agree. When the job market is bad, one logical step is to remove yourself from it, and pretty the much only way to do that (while still trying to secure an income, obviously) is to start your own business. Just one more component to the Great Rearranging. We'd bet anything that, two years from now, when the Census Bureau releases its 2009 non-employer business data, it will reveal even bigger jumps.

Forget about that so-called “7-Year Rule” for maintaining your business records. That’s what Attorney Christine Branstad tell us in a recent post in the IowaBiz Business Record Blog.

It may be a tax guideline, she says, but it’s a business and legal myth. She goes on to explain why and offers the following advice: "work with your attorney to design a record retention plan. Be sure the plan covers paper records and electronic data. Once you have a record retention (and destruction) plan, integrate that plan into your business processes."

But there’s an additional retirement plan component to all of this, particularly as the July 31 deadline for filing a Form 5500 for most retirement plans approaches. The myth here is that retirement plan records only have to be retained for a period of at least six years after the date of the filing of an ERISA-related return or report, and that the materials should be preserved in a manner and format (electronic or otherwise) that permits ready retrieval. All records that support the plan’s annual reporting and disclosure should be retained, this myth goes.

Now here’s the practical side of it. While it is fairly common for a plan sponsor to contract with outside service providers, such as our firm, who provide certain reports and prepare the 5500 filing, the Plan Administrator remains ultimately responsible for retaining adequate records that support these reports and filings. In addition, the Department of Labor requires employers to maintain records sufficient to determine the amount of benefits accrued by each employee participant.

Instead of relying on the “6-Year Rule", best practices would be to maintain certain records for the life of the plan. The thicker the paper trail, the easier it will be for the plan to respond to an inquiry from a governmental agency or a request for information from a plan participant.

Both the Internal Revenue Service and the Labor Department, the federal agencies that have oversight of retirement plan tax aspects and reporting requirements respectively, can and have requested information for periods “back in the day”.

It’s far easier to have the records in the first place than to have to recreate them for the IRS or DOL.

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.

Our sister site Slate runs a characteristically witty and insightful take on peer-to-peer lending Websites--in which wannabe borrowers tell their stories and ask to borrow money from, well, pretty much anyone who happens upon their request and wants to fulfill it. The article's conclusion? P2P lending's supposed pluses are real, as are its supposed minuses.

The pluses over traditional lending institutions, i.e. banks, include the lack of "an extra layer of potentially corrupting bureaucracy". More importantly, the author notes, "Personal lenders may also better pick up on 'soft' characteristics of borrowers—a compelling story or convincing picture—that may be a true indication of likely repayment. Loan officers burdened by institutional rules on borrower collateral or credit history may not have the discretion to act on such information." The results of this increased reliance on "soft," or holistic, information speak for themselves: lenders (the author deals mainly with the site Prosper) have proven "quite adept at assessing the creditworthiness of prospective borrowers," the author reports, with their ability to predict credit score being far "more accurate than could be explained by accounting for the tangible financial data available."

On the other hand, this increased reliance on "soft" information can also lead to irrational lending decisions. A good, memorable example: a "massive beauty premium," under which there is a tendency to give good-looking people--prospective borrowers frequently post pictures--cheaper loans than they would otherwise deserve (in fact, interestingly enough, statistics apparently show that good-looking people are actually more likely to default!). Less amusingly, the practices of some P2P lenders have indicated a degree of racial discrimination.

Additionally, the author notes that using a P2P Website isn't exactly cutting out the middleman: there is, after all, the Website itself. The Website, of course, isn't remotely as looming a middleman as an actual bank doing the lending, however. On the other hand, those banks are insured by the federal government; as of now, P2P Websites are not.

In sum, P2P lending's great strength is its ability to exploit the "soft" financial information in order to make smarter loans, and to get credit to borrowers who may not look great on paper but who, at the end of the day, are going to pay back their debt: "This 'soft' information is particularly important for higher-risk borrowers with little financial history to guide lenders' decisions."

Higher-risk borrowers with little financial history? Sounds to us like the typical fledgling small business owner. It seems, then, like P2P definitely is a good option.

A final note we'd make. Wouldn't it be great if there were some lending mechanism that combined banks' expertise and professionalism with P2P lending's ability to take a more holistic, extensive look at prospective borrowers? Oh, right. They're called community banks.

We wanted to announce a forthcoming installment in our BizBooks author discussion series. But we're doing it a little bit differently this time. On July 14th (Bastille Day!), we will have a conversation with Alaina Love, lead author of The Purpose-Linked Organization, and then we will print it on the blog. In the meantime, if you have any questions you would like to ask Ms. Love, please do email them to us.

And who, you might ask, is Ms. Love? Well. Love, SPHR, is the President and co-founder of Purpose Linked Consulting, a leadership and organizational development consulting firm located in the US and Thailand.

And what is The Purpose-Linked Organization?

The book examines the rising tension in the relationship between employees and corporations. It posits that workers today have a burning desire to identify their purpose and passions, and find an outlet for them in the work environment; at the same time, their employers are feverishly searching for new ways to achieve outstanding results through their people. What far too few organizational leaders realize is that purpose combined with passion need not lead to discord--it could, according to Love, be the new competitive edge.

Based on the authors' proprietary research and in-depth interviews with a diverse group of high-powered executives, The Purpose-Linked Organization offers easily implementable ways to channel the power of each individual’s passions in a positive, purposeful direction. It teaches you how to link skills, values, and passions to performance—and how doing so will bring results. Just as importantly, it enables you to confidently assess your own purpose and passions so that your own organizational role will be as engaging, fulfilling, and productive as possible.

Love's resume is quite impressive, so we're really excited about this. She has consulted to large, multinational Fortune 500 firms as well as small, independent companies and hospitals for over 25 years. Before embarking on her current career as a human-resources expert, Alaina was a research scientist for Merck in the field of immunology (!), where she worked to develop products for the treatment of diseases such as Rheumatoid Arthritis and Lupus.

So send your questions in! And get ready for the discussion on July 14th.