In the past, we've spoken earnestly about the potential for scrappy, low-cost entrepreneurs to revitalize urban areas that have been economically decimated by years and decades of deindustrialization, whether it's Detroit or Youngstown, or even New York's financial industry, decimated by its own unique set of problems.

So count us pleased, but not particularly surprised. to learn that New Orleans, hurt to a far more profound extent than even battered Detroit, is now a prime destination for wannabe entrepreneurs. A combination of cheap rent and expenses generally (because of the way in which the city is still reeling four years after Hurricane Katrina hit); deliberate tax incentives; and the desire of many in the city's diaspora (if you will) to come back and be part of their hometown's rejuvenation have already given rise to four distinct entrepreneurial hubs. Actually, there is one other appeal to the town: in the article's words, it's "the ultimate college campus for adults." It does not seem unsafe to predict that many of these brand-new companies will be integral to rebuilding the great, hurting American city.

The New York Times runs a valuable article about Twitter, arguing, "Small businesses outnumber the big ones on the free microblogging service, and in many ways, Twitter is an even more useful tool for them."

Why "more useful"? "For many mom-and-pop shops with no ad budget, Twitter has become their sole means of marketing. It is far easier to set up and update a Twitter account than to maintain a Web page. And because small-business owners tend to work at the cash register, not in a cubicle in the marketing department, Twitter’s intimacy suits them well." Twitter is all about facilitating interpersonal connection, which is small business's natural forte. It essentially makes word-of-mouth "marketing" much, much more efficient than it could previously have hoped to have been without, actually, fundamentally changing it.

And yet does that mean you should cast aside small businesses' previous favorite method of direct-to-customer marketing, the e-newsletter? No--not at all, according to this Entrepreneur article. The general point of the article seems to be that while indeed nothing does beat social networking devices like Twitter in terms of enabling you to maximize your reach--that is, in terms of the sheer quantity of potential customers to whom you can speak "directly"--there is still nothing like email when it comes to building a list of as well as marketing to quality customers. Email--even an email that goes out to a bunch of people--feels more intimate than Twitter, and frankly is; it also enables you to offer specials to a more select group of people than simply anyone with an Internet connection who happens to happen upon your Twitter page.

Make new friends but keep the old, the saying goes. You should definitely get nice and cozy with Twitter--it is increasingly looking like it will only become more central to the way we do business and even the way we live our lives. But don't forsake the good old-fashioned (and by old-fashioned, we of course mean ten-year old) e-newsletter just yet.

When we last checked in on the America's Recovery Capital program--under which "viable" small businesses can apply for 100% government-backed, no-interest loans of up to $35,000 to pay back pre-existing bank debt--it looked to be in trouble: specifically, it looked as though private lenders, who face little incentive to make these loans and more risk than you'd think for something ostensibly 100%-government backed, were largely refusing to make the loans.

You're The Boss has been hearing something similar, and has put out a call: if you've received ARC loans, post it in their comments. The commenters have obliged, reporting back on how some of the country's biggest banks (and, of course, biggest recipients of taxpayer bailout help)--BofA, Chase, Wells Fargo, et al--are not participating in the program. Not that you can blame them! For the reasons we enumerated in our previous post, it really probably isn't in private lenders' interests to go along with ARC. And if you were one of those small business owners who could've used the quick cash? Too bad.

Google has received much attention for its new ad campaign for its suite of cloud-based software, Google Apps. It is urging customers to "Go Google"--to switch over to these applications to conduct their business. Switch over from what? Well, from Microsoft Office, and even from operating systems such as Windows and Apple's (hence the much-discussed news from yesterday that Google CEO Eric Schmitt departed Apple's Board of Directors due to the increased frequency of conflicts of interest, which everyone took as a sign not that Apple was moving onto Google's turf, but vice-versa). So far, says Google, almost 2 million businesses, universities, and organizations have signed up to "go Google".

So what does this have to do with you? Well, we are big proponents of increasingly utilizing some sort of cloud-based software for your business needs. We think it's a great, immediate way for small businesses to exploit their natural advantage for low-cost nimbleness. Google ain't paying us (yet!), so we're not going to sit here and talk about Google specifically too much (except to say, that, er, we ourselves long ago went Google). But the advantages of cloud computing for small businesses are ample and well-documented. So go something, and make sure that something has its feet firmly planted in the cloud.

Whether provoked by President Obama's proposed tax plan or good ol' Joe the Plumber, we have addressed proposals to raise tax rates on the higher income margins in the same fashion: by pointing out that, contrary to talking points proferred by those on the right side of the political spectrum (from the Republican Party proper to interest groups like the National Federation of Independent Business), most small business owners simply don't take in enough per year to get hit by those raises. Our position is: by all means have the debate on raising high marginal rates on ideological grounds--there is real disagreement there, and certainly real practical implications. But leave appeals to small business owners out of it. Most of them will be unaffected.

Well, the latest battleground for this same argument is a proposal, expounded by more than one of the health-care reform bills to emerge from the House and Senate over the past few weeks, to help pay for subsidies to lower-income folk to buy health insurance by levying a surtax on those households that take in over $350,000 per year (which is to say, on under 2.5% of all households). Once again, those opposed are invoking the embattled small business owner. This time, Washington Post columnist Steve Pearlstein--who, notably, is a centrist, and who declares that the surtax "isn't a good idea" (although he also is willing to compromise on it for political reasons)--supplies the valuable repudiation of that same old, stale talking point.

Pearlstein shows both that a minority (less than one quarter) of those who would be hit by the surtax actually derive most of their income from business profits (e.g., are small business owners), and that only a very small minority (well under 5%) of small business owners would be subject to the surtax. (He further notes that only an extremely small minority of small business owners--fewer than 1% of them--would have to pay the full surtax, which kicks in only on annual income exceeding $1 million; and even that full surtax is a fairly modest 5.4%.)

Pearlstein doesn't stop with the data. He goes on to point out a significant majority of small businesses (not a small minority) would actually be greatly helped by most health-care reform plans on the table: certain reforms would make it cheaper for them to insure their employees as compared to big businesses; mandates would lessen the competitive hiring edge big businesses currently enjoy vis-a-vis health insurance; and tax credits would ease the shift.

He might have added that good reform will actually save small businesses billions in the long run. But we forgive him. Go read his piece.

Those hundreds of billions in stimulus dollars are still very much being spent, and will continue to be in the coming months and years. Which means, of course, that billions in stimulus-related federal contracts have yet to go to businesses who figure out how to get in on the action. How can you be one of them?

Entrepreneur has a novel suggestion: don't try to be. Not exactly, anyway. Extensive roadblocks, as well as the fact that government contractors tend to be creatures of habit even when they're not insanely overwhelmed, as they are right now, mean that if you are not already a business that has received direct government contracts, it's likely not worth the trouble for you to start to try to be one of them. Moreover, miles upon miles of red tape, and pages upon pages of paperwork, can make winning one of those contracts as much of a curse as it is a blessing. ...And yet what about those billions just lying there?

The article recommends that you situate yourself "a little lower down the food chain". Don't try to be the business that wins the contract. Try to be the business that the business that wins the contract subcontracts out to for work that furthers the actual contract's fulfillment. You've still taken advantage of the stimulus; you've still increased your take. But you've minimized the hassle associated with winning those valuable contracts. Like a runner who drafts a competitor in a race, staying directly behind him and letting him take the wind, you have made the downsides someone else's problem while still enjoying the extra business.

This strategy also, of course, reveals one of the reasons why the stimulus was a good policy decision: for its so-called multiplier effects. The idea was not literally to have the federal government pay the U.S. people $787 billion, something that would indeed be more efficiently accomplished via tax cuts or rebates. Rather, the point was to see that money as a starting point that would in turn encourage further spending and increase economic activity well beyond that initial amount.

In other words, the stimulus is supposed to help more than just those who directly receive its funding. Might as well take advantage.

In this fourth installment of my series on what makes great entrepreneurs, 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. (For previous installments in the series, see here.)

In this column we look at the need for entrepreneurs to have obsessive passion and drive. For good and for bad, the most successful entrepreneurs pretty much eat, sleep, and breathe the business. Their minds never stop going, and in fact in many cases sleep is rare.

Once you get “the bug,” frankly it is hard to let it go. When I was head of the Wharton School’s worldwide alumni association, a sophomore at the school came to me for advice. He told me that he had a great idea for a new business (it was a great idea) and he was seriously thinking about dropping out of school to pursue it full-time. Of course he could point to famous dropouts such as Bill Gates and Michael Dell, but by the end of the talk I convinced him to stay in school and pursue the dream in his spare time and summers. He thanked me and did graduate this year. And yes, he’s still pursuing the business. But just as important was the passion that made him question packing up and shipping out right then and there.

Where does the passion come from? In my case, what drives me are two things. An intense desire for success; and the love of not having to work for anyone else. I’m sure analysts could have a field day wondering why that intense desire is there, but this is not Psychology Today. Someone once asked me if I’d like to be rich and famous, and I responded that I don’t need to be famous. My mood is almost directly a result of whether it’s been a good or bad week or month in the law firm business-wise. This has not been the greatest for my wife, who says when I worked for others in a big firm and was miserable I didn’t “bring it home with me.” On the other hand, landing that new client, closing a corporate transaction, or helping a client solve a difficult problem is the only drug I need. I’m on my computer by 6 am and part of what gets me up every morning is one of the entrepreneur’s laments I wrote about in my previous series: the fear of all of it going away.

As to the not working for anyone else thing, I think some people are simply wired to want to have others make the big decisions so they don’t have to. They also want more certainty in terms of income, benefits, and the like. Entrepreneurs, on the other hand, are wired to want to fly without a net. But where we take the business and how we spend our day, week, month, year, is 100% up to us. We get all the credit and all the blame. And we love it. Most of the time.

With our youngest now in school full-time, I decided recently to go back to my prior habit of working from home one day a week. This is not a day off; in fact, it is my most productive day, with calls, reading I have to do, and sometimes just doing some good thinking. And it gives me more time with the family. If I were someone else’s employee, or a partner in a larger law firm, there’s simply no way I would get away with that on a regular basis. During the month of June this year, I traveled on business to London, China, Las Vegas, Boston, and Florida. I never travel that much and was basically gone most of the month. Again, it would be nearly impossible to pull that off somewhere else. Luckily I have a terrific team handling the day-to-day legal work for clients while I was gone.

What makes the passion go away for some? That’s the big question. In some cases it is the types of things we talked about in the prior series--boredom, burnout, the business growing too bureaucratic, or trouble in the business. Many are facing that in this tough economic environment, and no question my business has been hit like everyone else’s. Indeed, I would say that no prior downturn has prepared most of us for what we are going through now. Might I consider other strategic options? I never close the door when someone wishes to open it.

The bad economy has another positive effect, though: it creates many new entrepreneurs. I’ve always said the best time to start a new business is in the depths of a recession. Cause you have nowhere to go but up. To all you newbies, good luck, hang in there. And men: get ready to start buying either Rogaine or hair color…

Next time: are you a macro-manager?

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

A step forward and a step back: New York City is sending mixed messages when it comes to the small restaurants that form such a crucial part of the city's economy and social fabric, in ways that reveal how a government--any government--should and should not encourage entrepreneurship.

First the good policy. The city's Economic Development Corporation will provide $1 million to someone who wants to buy an abandoned market in East Harlem and turn it into a space with cooking and baking equipment where aspiring chefs and restaurateurs (that's right, folks, you drop the "n"!) can pay below-market rent to further their own hopeful food-based businesses. “What a good way to put tax dollars into action,” was one baker's response, and we couldn't agree more. That money is going to pay dividends that well exceed the initial sum in the form of more economic activity, more tax revenue, and more jobs. It's a perfect example of the government seeing the way in which it can exploit the low expenses and rent of the recession era to promote small businesses and its own well-being in a cost-effective manner. A tip of the hat, New York!

...And a wag of the finger, too! Even as some new restaurants will gain a leg up from the above, others are finding themselves in deep trouble because the New York State Liquor Authority, which already requires an unusually (and inappropriately) expensive and byzantine process for restaurants, bars, and the like to gain legal permission to serve alcohol, is severely backlogged. The result is that new businesses are having to wait several months to get their liquor licenses, in turn depriving them of the remarkable profit-making device known as selling alcohol: restaurants typically derive 10% to 30% of their revenue, but as much as 50% of their profit, from alcohol (you didn't really think your $5 beer cost $4 for the bar to prepare, did you?). The delays have killed jobs and businesses: truly a senseless slaughter.

Right now, with the recession continuing, the local governments' policies should probably be, to paraphrase Bob Dylan, to get out of the road if they can't lend a hand. We're not exactly no-regulation, small-government types. But seven months to serve wine at your restaurant and beer at your bar? That's insane. Small businesses, with minimal start-up costs, are going to drag the rest of the economy out of its mire, if we only let them.

In the current climate, good news doesn't have to be that the economy added jobs; all it has to be is that the economy lost fewer jobs than it had been losing. By that metric, July's ADP monthly employment report brought good news: the 371,000 jobs the U.S. economy lost was a marked improvement over June's 463,000, and indeed it was the lowest drop in eleven months, or since before the financial collapse of last September. Midsize companies--those with between 50 and 499 employees--lost 159,000 jobs, down from June's 203,000. And genuine small businesses' 138,000 was also lower than June's 169,000 figure.

Meanwhile, Scott Shane at You're The Boss provides an interesting insight: namely, that most "small-business job creation," to use a classic politician's stock phrase, is really coming from what ADP calls midsize businesses. Of course, bigger businesses also by definition have more employees, which could skew the job-creation stats in their favor. Suffice to say that small and midsize businesses are the ones that are easiest to start up and quickest to grow, and so any policy aimed at improving unemployment numbers absolutely must focus on cultivating small businesses and encouraging such businesses to make more hires.

When last we visited the topic of discounting, we noted that even Vogue, the ultimate in high-end fashion, is encouraging women to consider low-cost alternatives to expensive products. This week, meanwhile, brings news that even those expensive products, in this economic climate, can be gotten on the cheap. And the companies that are making such deals happen are doing quite well by themselves.

Fortune runs a series on these companies, such as Gilt, HauteLook, and others. 2009 is projected to be a boom year for these companies' revenues. Not because prices are up, but because they're so far down that what they're selling--which are actually the highest of high-end luxury itmes--are selling like hot cakes. Such are the disorienting times we live in, and such is the way to take advantage of them.

An expert on women's legal issues has lodged an impassioned plea for substantial health-care reform that is well worth a read. While many of her arguments apply to all small business owners, it's worth taking stock of how women small business owners in particular are disadvantaged by our current health insurance system.

First, there's the question of how small. Due to economies of scale as well as specific structural disadvantages, it is basically a rule of thumb that the smaller a business, the more expensive it is per employee (including a salary-receiving owner) to buy insurance. And it is a fact that small businesses owned by women tend, statistically, to be smaller than those owned by men, according to the U.S. Census. While on an individual level, insurance companies may not be attempting to screw over individual women small business owners, over the group as a whole that is the indubitable effect of this dynamic.

Then, there's the question of alternatives. That is: if women small business owners find that having their businesses provide insurance to their employees is prohibitively expensive--for the reasons discussed above and so many more--then, if they can't get on a spouse's plan, they must try to shop for insurance individually. But guess what? The individual insurance market is unfair to women, charging them more and failing in some cases to provide coverage for sex-specific contingencies such as maternity care.

Put it all together, and not only do you have further cause to hope for genuine, meaningful health insurance on behalf of all small business owners, but you also have a case to be made that our current health care system is fundamentally discriminatory against women, and women small business owners.

Here's a great example of a misleading headline. A new CNNMoney story reports, according to the header, "Small Business Administration Chief: 'We're The Popular Kid'". And it goes on to dutifully record that, indeed, SBA Head Karen G. Mills insisted, "The world has changed, and everyone has realized that it is small businesses that are going to drive the economy and the recovery. We're the popular kid at the dance."

However, the article's actually much better than its headline, for it goes on to detail all the myriad ways in which, if the SBA and small businesses are indeed the popular kid when it comes to crafting policy from D.C., then all the wannabe cool people have an awfully weird way of displaying their reverence. After all, despite undeniable boosts given to the SBA's lending programs, agency lending remains down, and indeed "the change small business owners most often press for--greater direct government lending, bypassing the banks entirely--isn't a likely one." Popularity will only get you so much, apparently.

The one welcome bit of news? Mills is clearly serious about health-care reform--"the status quo is untenable," she says--and about shaping health-care reform that rectifies the current disadvantage suffered by small businesses vis-a-vis big ones. She says she advocates some sort of insurance exchange whereby disparate small businesses could band together, thus achieving the sorts of efficiencies associated with economies of scale. Come to think of it, why haven't we heard much about SHOP, which would allow small businesses to do just that, recently?...

Time for a very b-school type of post, as befitting something that came out of the Knowledge@Wharton program. But we found this article very interesting! Basically, it posits that there are three ways to plan for the future if you own and manage your own business:

1. A hyper-cautious "zero-future" approach, wherein you simply don't plan for the future, instead taking things roughly one day at a time and minimizing your decision-making to time periods where you can maximize how much you know about the situation on the ground. You're less likely to make gigantic mistakes this way, but you're also less likely to grow substantially.
2. A bold single-future approach, wherein you guess (educatedly, to be sure) that one particular likely situation in the future is what will come to pass, and plan accordingly. Hit this one right, and you've put yourself in an awesome position. Hit this one wrong, and you might go out of business.
3. A scenario-thinking approach is a more modest modification of option 2. Filtering out what you can, you make a series of educated guesses--as opposed to predictions, which is essentially what you're doing in option 2--in order to develop a series of highly likely future scenarios. You combine this probability set with a commitment to managerial agility in order to make sure that your business is ready for any of these scenarios.

With these sorts of things, option 3 is always what you're supposed to do, and it's no different here. It's deliberate, yet bold. It allows for safe growth.

Most of all, we'd add, it allows you to exploit your own capacity for flexibility--a capacity that in turn you are more likely to have if you are a small business. So it turns out that the managerial best practices according to Wharton work best if you're one of the little guys. How 'bout that.

John Tozzi over at The New Entrepreneur has a couple of smart posts on the importance of debt to small businessess--specifically, the importance of not having much debt.

In the first post, he notes that, statistically, you were far more likely to have survived the past year of awfulness if, two years ago, you were relatively debt-free. The real takeaway being that the recession hurt most everyone to be sure, but the vast majority of the companies it actually killed were probably not all that long for this world anyway.

And in the second post, Tozzi notes that, particulary when you're first getting going, you should really try to avoid racking up credit card debt. It is killer. And given that the recently passed credit card reforms didn't actually affect most small business cards, it's only going to continue that way.

Dog days, etc. Here's what to read in between naps.

Protect ya' neck! Think intellectual property protection is unimportant for small businesses? Think again. [NYT]

Protect ya' data. Some cheap and easy solutions. [Entrepreneur]

Apple vs. Google. The battleground? Smartphone apps. Find out how not to get caught in the crossfire. [Slate]

What Obama has (and hasn't) done. Plenty has been accomplished. Yet small businesses still struggle. [CNNMoney]

Getting gov grants. A how-to video. [eHow]

Who revived the electric car? According to The Washington Post, the answer may turn out to be a series of small entrepreneurial efforts, including Coda Automotive and Bright Automotive, that "are tapping into the expertise of others in bids to launch new vehicle brands featuring technology they say will leapfrog the major manufacturers." These small businesses--L.A.-based Coda has under 50 employees--are betting that their maximum agility will enable them to beat the Big Three, the Japanese and German giants, and the rest in the quest to market commercially sustainable electric and hybrid cars.

The experts say that the method cuts both ways. Coda outsources for all of its parts: its electric car has a Chinese chassis, a German designer (Porsche, actually), and--cheeringly, given the state of the domestic auto industry--power-steering from Troy, Mich.'s very own Delphi Automotive. This set-up allows the company to stay small and enjoy all the attendant benefits; as Coda's head put it, "We have a one-guy bureaucracy. Me." On the other hand, who knows how effective the company will be business-wise without a major marketing apparatus? To say nothing of, you know, a dealer network?

Whether Coda, Bright, and the rest actually do leapfrog the Big Three--and it certainly seems plausible that they could--is almost beside the point. Even the most ardent small business advocate knows that the big guys are crucial, too (actually, that's part of why we were in favor of bailing out Detroit). The real takeaway is the bracing effect the business efforts of these small concerns are likely to have on the big guys, just as the big guys' dominance spurs the the small concerns to try extra hard and to take extra-large risks. The U.S. auto industry started over a century ago with a Detroit that had a different entrepreneur on every street corner. So it seems only logical that the industry's reboot is going to require a similarly exciting confluence of new ideas and ventures.

Did you know about the health-insurance practice of "purging"? We didn't until we read this fantastic blogpost, but we suspect there are some small business owners who know about purging firsthand because they have been its victims. Purging is the way by which health insurers bypass the prohibition on dropping a currently insured group's policies. Basically, if you're, say, a small employer, and someone gets real sick and you end up filing larger claims than usual, and your insurer therefore no longer wants to insure you anymore, they can raise your premium as much as 15% (it depends on your state) in addition to inflationary costs, thereby giving you the choice either to be gouged or to lose your policies. Nice, huh?

Purging is a problem specific to smaller businesses: large businesses, the post explains, "self-insure," using their own funds--which they can do because of the sheer number of people whom they are insuring. (Meanwhile, especially vulnerable are businesses too small to self-insure but with over 50 employees--on whom premiums can be raised by any amount.) Of course, if the government were to enact health-care reform that permitted many and disparate small businesses to form an insurance pool, then this problem would disappear. It's almost as though small business have a stake in sensible health-care reform.

When does a failed business equal unemployment? More to the point, in which situations can a small business owner collect unemployment benefits in the event of a business failure? Forbes sets out to answer this excellent question. The short answer is: you can collect unemployment if you were, for tax purposes, an employee--that is, if you were paying yourself a salary (even if you were the business owner). This is generally the case if your business is an LLP or an S corporation, and not if it is a sole proprietorship or a partnership.

Here's a good hint: are you paying an unemployment tax? If so, you're probably eligible for unemployment benefits; if you're not, then you're probably not. (Key exception: if the government has reason to believe that you're not really unemployed, and in fact are just stalling your business under the calculation that you'll do better collecting unemployment than running it, then they may withhold benefits. Which is probably fair.)

That's the way things are. What is the way things ought to be? We'd suggest that even those small business owners who make the decision, out of a rational calculation of self-interest, not to incorporate, or not to pay themselves a salary--in short, to make themselves ineligible for unemployment benefits in the event that their businesses fail--should nonetheless have some sort of safety net to fall back on. This isn't just a question of decency or ideology: the existence of that safety net will provide further encouragement (or at least remove an obstacle) for entrepreneurs to take extra risks and potentially wind up creating innovations that accomplish a whole heap of good for everyone. At the very least, a failed business should not mean no more health insurance for the owner. That, we think, is something our legislators and president should ponder during this August recess.

When last we checked in on beleagured small-business lender CIT, it had failed to convince the federal government to bail it out (our very own Anonymous Banker predicted this turn of events correctly). Since then (while were on vacation), CIT crafted and got other folks to agree to a emergency $3 billion loan package that enabled them to stave off insolvency. Many see as a canary in the mineshafts both of the question of whether something as comparatively small as it is will be considered "too-big-to-fail" (answer: it won't be) and whether there is still a place for the dedicated small-business lender (prognosis: not great).

Today's news is that CIT's respite may prove all too brief: it is still heavily, dangerously indebted, with $10 billion in notes due by the end of the year. Forbes goes into more techincal, financial detail, but suffice to say that those lenders who rescued the company last month will probably craft a restructuring plan by the end of next month, which will in turn form the basis for a prepackaged bankruptcy. If everyone is lucky, that will go as smoothly as it's supposed to, and CIT will emerge...

...as what? A small-business lender? One wonders how much money is still in that; one wonders if even CIT thinks that is still where its business should be. What we're likely to see, rather, is a once formidable avenue for small businesses to access credit to fall permanently. And nary a peep will have been heard from the government.

Fortune examines how good a job President Obama has done at accomplishing what he promised he would for small businesses. They split his agenda into four categories: the credit crunch; health care; taxes; and job losses.

Here's what Fortune had to say. Our thoughts then follow.
-Credit crunch. Though February's stimulus boosted several lending programs and created several more, lending is probably not back to where Obama would have preferred it.
-Health care. Obviously nothing has been passed yet, but in his suggestions, Obama has displayed a willingness to make it easier for small businesses to offer insurance to their employees, even while perhaps also mandating either coverage or a penalty.
-Taxes. While some stimulus provisions lightened small businesses' tax load--most notably an extension of the so-called "carry back" rule to five years from two, exclusively for small businesses--Obama has refused to act to raise the estate tax's exemption.
-Job losses. July's numbers indicate that the stimulus may have succeeded in, at the least, slowing job depletion.

What do we think?

-Credit crunch. We have to wonder: is lending down because Obama's policies have been ineffective, or because lending would be down no matter what, and indeed might not have been the place on which to focus capital--political and real? Here we would at once acquit Obama's policies and indict his choice of emphasis.
-Health care. Here is where we would reserve our strongest words. Obama's leadership--if that's the word for it--has struck us as weak and rudderless on this absolutely central issue. In particular, we'd like to hear him advocate more strongly for the inclusion of a public option, which we think would be good for small business, and simply to hammer home the rhetorical point that our current system of health care discourages entrepreneurship, and that entrepreneurship is something worth fighting and paying for. Isn't it, Mr. President?
-Taxes. Here is where Fortune is way, way, way, way off base. The estate tax?? Take issue with it if you want, but leave small businesses out of it: the levy has about as much to do with small businesses as apples have to do with oranges.
-Jobs. No one said the stimulus would magically save all the lost jobs, and it's extremely disingenuous to argue that the continuing rise of the unemployment rate offers proof, or even evidence, that the stimulus failed, or even succeeded less than it was supposed to. (Unemployment is well known to be a lagging indicator: it will continue to fall even as an economy deteriorates, and continue to rise even as an economy recovers.) Actually, economists have expressed surprise that the rate's rise has slowed to the extent it has. Obama and his stimulus deserve credit here, and Fortune is correct to grant it.

Really, though, health care strikes us as the big thing here. The outcome of Obama's push for some sort of reform and the final shape that that reform takes will determine, for us anyway, much of Obama's and the Democrats' small-business report card heading into--no, it's not too early to start discussing it--the 2010 midterm elections.

Looking at the results of the National Federation of Independent Business's July small-business optimism survey, Fortune Small Business concludes that the biggest problem affecting small businesses right now is spending: specifically, the lack of it. One-third of those surveyed said weak sales was their number-one problem. Reported profits are near their all-time low from last January.

In one sense, it's hard to know where the line between poor sales ends and the line between a poor credit environment begins. The owner of a Dublin, Ohio wine shop is struggling to purchase more inventory because he hasn't made enough sales; at the same time, a bit of credit, which has been unforthcoming, would likely enable him to square that circle. We'll never really know the result of the counterfactual, but somehow we think that if government efforts had focused more on helping small businesses by juicing consumer spending (and providing more of it itself) than by offering easier credit, things would be looking a bit better right now.

Anyone who has lived on Manhattan's Upper West Side (we have) know that the caricature of it as some upper-middle-class yuppie liberal paradise that we know so well from Nora Ephron movies is, well, not actually all that far from reality. In further furtherance of that cliche--but, really, for smart business reasons--many small businesses there are holding a "Neighborhood Gratitude Event" a week from today, the New York Times (the neighborhood's house organ) reports. There will be discounts; there will be raffles; there will, in some cases, be free booze. The idea for these businesses is that in showing gratitude for their customers, their customers will show some gratitude back. As the article puts it, "Being broke may never be chic, but counting one’s blessings is all the rage right now."

What struck us about the event is the way in which it reveals the special advantage small businesses can harness, marketing-wise, over their larger competitors, which is to convince their customers that they are in the same boat; that, indeed, in some abstract sense, for your customers to help you is for your customers to help themselves. Think about the gratitude event, and imagine how disingenuous it would feel if Wal-Mart--or, say, a large company that even had a good reputation--tried to do it. Who's expressing gratitude: the company's millions of shareholders? But small business owners tend to be just like their customers: same income levels, same business anxieties, and, yes, same neighborhoods. That provides a limitless opportunity to enlist customers in their businesses' success.

Back before he was even president, we praised Barack Obama's proposal to use government funds to expand rural broadband access as a pro-entrepreneur move. Now it will not matter where you live--if you have a great idea for a business, you can cheaply go for it right from the comfort of your own home. Today, Fortune Small Business updates us on the initiative, which in the interim received over $7 billion as part of February's stimulus package.

"People like Bill Gates and others in Silicon Valley are bright people," says an executive at one wireless company, "but they had access to social capital to incubate and nurture them. The social capital has been drained out of rural America for several decades now. We can fix that." (We suspect he's read Malcolm Gladwell's Outliers, which makes a similar argument.) The important thing to remember, though, is that expanding broadband to enable future Bill Gateses doesn't just help the future Bill Gateses: unless you think that Microsoft only benefited Microsoft shareholders, then you know that more succcessful entrepreneurship is a win for everybody.

We've been awfully dour over the past several days of blogging--consumer spending problems; CIT circling the drain; health insurers' "purging"--and even our post earlier today on being "grateful" is really more of a bittersweet sort of thing.

So let's end today with two upbeat things for you to read!
-Newsweek tells you why now is exactly the time to start a business.
-AP reports that business is picking up for small companies throughout various industries and regions.

One of our favorite bloggers, Robb Mandelbaum, gets tapped for the Big Leagues today for a B1 (front page of the business section) New York Times story on the America's Recovery Capital program. Mandelbaum's article gives the whole issue absolutely definitive treatment, and is well worth your time.

As we've previously discussed (here and here), the problem with ARC--under which "viable" small businesses with pre-existing bank debt can apply for interest-free loans from banks but backed 100% by the Small Business Administration--is that the banks have surprisingly little incentive to participate in the program, as they are being paid only prime interest rate minus 2% by the government for their troubles. That is crappy inducement, especially considering that it costs time, effort, and money to administer the program, and considering that a 100% guarantee doesn't always end up being a 100% guarantee (damningly, even Mills acknowledged that the guarantee ends up actually going into effect only 95% of the time!). So, yes, the program is off to a slow start.

Interestingly, the SBA claims that ARC was actually designed to trickle out slowly, in order that it can last through September 2010, Mandelbaum reports. "We like the fact, actually, that they will be spread out over time. We have no doubt that we will make 10,000 loans," SBA head Karen G. Mills tells him.

Mandelbaum also does a splendid job going into detail on one of the program's most bizarre features: the fact that its eligibility only extends to small businesses that are both struggling with bank debt and yet also are "viable". Viability is defined, apparently, by having been in business at least two years; maintaining positive cash flow (though not necessarily a black bottom line) in at least one of the past two years; and possessing a two-year cash flow projection that indicates continued solvency. So right there you're eliminating both the too-successful and the not-successful-enough, and instead opening the program only to those businesses that just so happen to hit the regulatory sweet spot.

And the banks--again, unsurprisingly, and frankly understandably--tend to use those guidelines more as excuses to reject loan applications than to accept them.

We would only add one more beef with have with the program, which is a fault more of design than of execution: its exclusion to those without pre-existing bank debt makes it seem just as much a sop to banks with outstanding loans as it is to actual small businesses.

Meanwhile, in a complementary blogpost (as opposed to what you're currently reading, which is of course a complimentary blogpost--har har har), Mandelbaum reports the actual stats--a paltry 1,127 ARC loans have been made by a little over 400 banks--and divines the seemingly inexplicable fact that fully one-third of these loans were made in the three Midwestern states of Minnesota, Iowa, and Wisconsin. Unfortunately, the country we come from is not called the Midwest, and in the full 50 states, the ARC's trajectory seems decidedly downward-sloping.

A few days ago, we noted that one-third of U.S. small business owners name slow consumer spending as their top business concern. Well here come the statistics to bear that out: despite the remarkable success of the famed "cash for clunkers" program, which actually did spur a 2.4% monthly rise in auto sales, consumer spending declined this past July. Only by .1%; but most economists were actually expecting an increase. (Other bright spots? Spending at health stores, clothing stores, and restaurants and bars rose slightly.) Even the recession-friendliest place on earth, Wal-Mart, saw a decline in sales in its second quarter (but don't worry, folks: their profits still rose--they're going to make it after all!).

So what does this news mean for you? We think it means that all the talk of a turnaround, of the recession being over, and of green shoots, while no doubt all true, ought to be treated as, let's say, inoperative. Unless you happen to be in a weirdly robust growth industry (like repairs!), now is still not the time to take out that big new loan for that big new growth plan. Keep hanging in there--the worst, no doubt (and barring further catastrophe), has passed--and soon we'll get better spending news. We hope.

Baby Boomer nostalgia. A huge presence on the Internet and Facebook. An inexpensive, non-luxury, classic product. A new iPhone app. "Other offbeat aspects," such as in-store acoustic concerts, that are, naturally, vaguely indie. Yes, Gap's new ad campaign, "Born to Fit," for its new retro-styled 1969 Premium Jeans, is useful to pause and glance at it for a second as a completely prototypical way to market your company and your product in the summer/fall of 2009, no matter how big or small your business is. (Really, all that's missing is a Twitter feed. Oh, no, there it is.)

The jeans themselves will sell for $59.50, but are designed less for the crowd that ordinarily buys $10 jeans at vintage stores or, we suppose, Old Navy (which is also owned by Gap's parent company), but for those who usually buy designer jeans for over $100. But perhaps the most crucial aspect to the campaign is the way in which it represents not a new horizon for Gap but actually a return to its roots as a clothing company most known for selling that special type of cotton known as denim (it began its company-life as primarily a jeans store, in, yes, 1969).

It is this combination of cutting-edge marketing avenues with a firmly old-fashioned, even conservative message that we think truly jibes with the times. And, despite Gap's obvious big-ness, there are really no businesses better situated to convincingly claim this certain flavor of authenticity than small ones.

Via his own post on The New Entrepreneur, Business Week's John Tozzi penned a great article exposing a truly outrageous discrepancy between the way the federal tax code treats the self-employed and the way it treats everyone else: "self-employed workers who buy their own health insurance essentially pay an extra tax on their premiums." The way it works is that while payroll employees pay for their premiums out of pretax income, and while the corporations (or, indeed, small business owners who give themselves health insurance through their companies), meanwhile, do the same, getting to deduct it as a business expense, the self-employed must purchase their insurance and pay for their premium the same they would buy a new suit, or a meal at a restaurant: with the decidedly post-tax money in their pockets.

Tozzi proceeds to go through the chances (or, really, lack thereof) of this fundamental injustice's becoming rectified in the course of the completion of new health-care reform. It is worth mentioning that one policy that may come out of the legislative sausage-grinder is a tax on insurance that payroll employees receive from employers premiums, a development that may, if constructed in a certain way, actually go a long way toward making the current system more equitable between the employed and the self-employed.

All that said, there is one sense in which Tozzi does bury the lead. He refer to the self-employment tax, under which those who receive income instead of or in addition to payroll wages are taxed double the standard 7.65% payroll tax--a 15.3% tax in addition to federal and other income taxes. The reasoning behind taxing the self-employed twice as heavily for payroll derives from the fact that while payroll employees pay their 7.65% and then their employers take care of the other 7.65%, the self-employed worker is, in a sense, both employer and employee, and therefore should take care of both halves. (As Tozzi points out, the self-employed has access to more deductions from his self-employment tax than the payroll-employed has to her payroll tax, but essentially always, as Tozzi also points out, the self-employed will still end up paying significantly more.)

However, the simple, ostensibly logical reasoning articulated above--self-employed pays both employer and employee shares of payroll tax--masks the fact that the self-employed are paying double for no actual good reason! Is the only way to get enough revenue for our payroll programs--chiefly Social Security and Medicare--to unfairly gouge the self-employed? (We get particularly agitated over the self-employment tax because we have been able to, er, enjoy it ourselves.)

Think of it this way. The tax code is constantly used as a way for the federal government to use fiscal incentives and disincentives in order to try to shape society in a way it believes is best. The lack of a tax on mortgage interest, for example, reflects the government's desire (whether or not it's correct) to encourage homeownership; the progressiveness of the tax code itself (whether or not it's nearly progressive enough actually to achieve its goal) reflects the government's desire to lessen class inequality by taking a bit more from the rich than it does from the poor.

But what societal good is possibly served by taxing the self-employed more heavily here? As far as we can see, the encouragement/discouragement that this policy offers is a carrot for staying in a payroll job and a stick for entrepreneurially striking out on your own. Needless to say, we don't think that's a very wise policy goal to have, and nor do most people.

We cannot say enough good things about today's utterly superb New York Times editorial on what health-care reform could accomplish for small businesses. In essence, it advocates an employer mandate--under which most employers are required either to insure their payroll employees or pay a penalty that would go towards insuring the uninsured, a dynamic commonly known as "play-or-play"--on the grounds that "It makes good sense to us to require small businesses to contribute to solving a problem that mostly affects their own workers" (especially since many small businesses would likely be exempt anyway). But even more valuable are the twin cases the paper makes, namely, that
1. the anti-reform rhetoric that tries to paint the vast majority of small businesses as being hit hard by potential reform is inaccurate at best, and
2. in fact, small businesses will be greatly helped by wise, effective health-care reform.

We could start printing excerpts, but what's the use? Go read the whole thing. Immediately!

Mid-August. You should be outside. But for once it gets dark out...

Seth Godin speaks. A helpful, catch-all interview with Mr. Small Is The New Big. [OPEN Forum (which is published by our sponsor, American Express OPEN)]

Healthiness is next to Godliness. How to run a (relatively) disease-free office. [The Exceptional Workplace]

All about the business cash advance. It's not ideal, but if you're hard-up for financing, this could be one way to go. [bMighty3]

Be all you can be. Management lessons from the Army. [NYT]

Growing the cloud. Some great, cloud-based applications for file-sharing. Because we're not afraid to be service-y! [TechCrunch]

Speak the statements! A guide to all those different financial and operational sheets you have floating around. [Small Business Trends]

Narrowing broadband. Stimulus-juiced rural broadband is great for entrepreneurship. Too bad some of the biggest broadband players want no part of it. [WaPo]

Whether or not green businesses are themselves in growth industries, media-induced green-business triumphalism most certainly is. And we have not at all been immune to the allure of this great story--save the environment! cash in on the stimulus! make money! In our defense--and in the defense of, say, this recent Entrepreneur piece (definitely worth reading), which outlines several successful new green businesses--there actually is a lot of truth to all of this. Last we checked, a substantial portion of the $787 billion allocated in the federal stimulus package really is going to go to green businesses, and many of them will be small businesses, too. Green businesses enable you to market yourself as both environment-friendly but also cost-effective. They really are the future.

But, as this great Washington Post article reminds us, we're not in the future, but in the present. And in the present, some small businesses that saw the future, bought into the triumphalism, and decided to make early leaps to try to become green-business forerunners are now severely struggling as demand for their products has simply not yet caught up to their hopes.

The piece is mostly about family-run Dowding Industries, an auto-parts manufacturer near Lansing, Mich. A couple years back, Dowding made the decision to all but get out of the auto parts business, in favor of parts for wind turbines. To that end, they borrowed a hefty $12 million and built a new, 38,000-square-foot factory. It's up-and-running, but, as the article reports, "So far the wind industry has not grown all that much. Last year, about 3,500 wind turbines were assembled and produced in the United States. By comparison, the auto industry was producing about 17 million cars a year in its heyday."

Part of the problem is that from the perspective of Dowding and surely many others, the recession could not have had poorer timing. But there is also a dynamic here that would exist regardless of the business cycle, and that is the extremely precarious balancing act required to get your company from Point A to Point B without expiring en route. Just because you can see the future does not mean you can see when the future will take shape. Be too aggressive in your growth strategy, and you can be stuck with a partly idled factory (and lots of debt to take care of). Of course, be too cautious, and you can find that your competitors have blown you out the water.

And as to where this leaves green industries for small businesses: a green future is still definitely Point B. But the journey may be longer than everyone--us included--had once thought. In the meantime, we could do worse than a bit of directly governmental spending to hasten this future.

Let us now praise the National Federation of Independent Business. This is a rare sight; ordinarily, we are taking the prominent small-business interest group to task for disregarding the real needs of real small businesses in favor of the needs of a pre-set ideological agenda. However, today, via the Daily Dose, we learned about Divided We Fail, a coalition dedicated to the proposition that, while the details certainly need to be hashed out, the broad goal of meaningful health-care reform should unite groups with disparate constituencies and ideologies. And indeed, who are the four main groups involved? The American Association of Retired Persons--always looking out for seniors' interests, it tends to be more liberal than not on these matters. The Service Employees International Union, easily the savviest and most modernized labor organization, but a progressive labor organization nonetheless. The Business Roundtable, which is a classic pro-business (read: conservative) lobby. And, finally: the NFIB. The group's mascot (pictured) says it all: for "Champ" is neither elephant nor donkey, neither red nor blue.

Meanwhile, a new post on OPEN Forum (published by our sponsor, American Express OPEN) ably lays out just how the current health-care system is a small-business killer. Put simply (and it's not like we haven't said this before, but still, it really bears repeating): it's massively expensive! Particularly for small businesses! Put simply, premiums for employer-sponsored insurance are getting rapidly more expensive even as fewer small businesses offer insurance (and remember: businesses that don't offer it have a hiring disadvantage compared to businesses that do). Bottom line? Small businesses pay an average of 18% more for their health insurance than big ones do.

This has been yet another installment of "Health Care Is A Small-Business Issue".

As long as we're on the subject of stupid taxes that apply disproportionately to small business owners, let's not forget the effective tax represented by the extreme onerousness of successfully claiming a home-office deduction on your return. Currently, as Fortune Small Business notes (and we ourselves noted several months ago), the deduction is so complicated--and such an audit red-flag--that less than half of those proprietorships eligible to take it actually do so. It makes no sense to on the one hand state, as official policy, that those who have a home office ought to be able to pay for it from pre-tax dollars, and then, on the other hand, to make it practically difficult for them to do so.

Fortune appears to be in favor of the same thing we were: a standard home-office deduction. And in fact, a bipartisan House bill would allow for a $1500 standard deduction as an alternative to the current version. We like that this is opt-in rather than replacing: those who want to go through the hassle of the full-fledged deduction should still be able to do so; but those who would rather spend their time on, say, the business they run out of their house should have a quick and simple way of ensuring they get the tax treatment they deserve.

John Tozzi takes a gander at the Federal Reserve's latest lending statistics (download here). His conclusion is that, as far as bank lending to small businesses goes, things are slightly better...maybe: "The survey shows that we may be approaching a turning point where credit standards for small business borrowers level off and begin to ease. But for now, many more banks are still raising credit standards than easing them, albeit not as severely as over the last year." Specifically, one out of 55 banks reported easing small-business lending standards over the past three months, as compared to 19 who reported tightening them. Which sounds lousy, of course, and in fact is lousy. But given that it has been a while since even one bank reported easing standards, and seeing as it has been almost three years since more banks reported easing them than tightening them, well, we take the good news where we can.

The one other point we'd make is that--not to downplay the importance of credit--this report is telling us less about the health of small businesses and more about the health (or, really, about the business decisions) of banks. In other words, while the small business credit situation may be fairly dismal (and if we're not incorrectly gleaning good news out of 1 bank in 55, then it's clearly dismal), the overall economic stituation of small businesses could conceivably be a bit better.

In this fifth installment of my series on what makes great entrepreneurs--ones who really 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 look at a term I thought I made up but in fact is very much out there in the Googlesphere: whether you qualify as a “macro-manager.” The term--which apparently I can't claim to have coined!--is obviously the opposite of being a micromanager.

So let’s start with micromanagement. Micromanagement occurs where a manager does not allow people freedom to make decisions, causing the manager to be heavily involved in smaller matters. Paradoxically, this desire to be involved in everything often stems from insecurity, but it can also be the result of a particular corporate culture. Some even say micromanagement can result from neuroses or other emotional challenges.

But what we can agree on is that micromanagement is bad for business. The best entrepreneurs learn to delegate day-to-day tasks, leaving them to the important business of dreaming, planning, assisting with key hires, and helping solve the major problems that arise. Micromanagement breeds resentment and lack of trust. It also takes the manager away from the important things he or she really needs to attend to.

Is micromanagement ever good? Well, in a small business you work very closely with people, so more direct supervision tends to be more common. Also, in tough times where you need to watch every step and every penny, the fact that you presumably can do things better than each of your staff may mean having a little more hands-on approach. Also you may find that there are certain employees where closer supervision is simply required, whereas others work better on their own.

In general for entrepreneurs, however, macromanagement is more likely to lead to success. Will your people make mistakes? Yep. If they don’t learn from those mistakes and avoid them in the future, maybe they are not the right employee for you. If they take a different stylistic approach to things than you do, isn’t that a problem? Only if the style somehow undermines you or hurts the business. Otherwise, it's better to let people do things their way, provided it's consistent with your overall business philosophy.

Are there risks in being a macro-manager? Yes. I had a client with a key executive who was cozying up to the customers as is his job. Unfortunately, my client didn’t realize the executive had a plan to leave a year later to set up a competing shop (after his six-month non-compete) using all those contacts. The client had to bring suit to stop the executive from pursuing these contacts by arguing that he took their contact information from the client. So yes, stay involved enough to minimize the risk of this type of mutiny. But that can be done better by ensuring you retain a strong, personal relationship with your client or customer, not through obsessively monitoring everything the executive does.

In my case, I am probably a natural micromanager, unfortunately. But I have painstakingly trained myself to evolve into what I believe is a very solid macro-manager. How did I do it? With an approach I call: “Close your eyes and pray.” I know that sounds a little flip, and it’s really meant more as a joke. I work hard to train my people well over periods of time, and then I allow them to do their jobs with minimal interference, knowing that my clients will be well-served by capable and talented people.

When I send out documents for clients or adversaries to review, typically I would state in an email that the documents are attached and for the recipient to contact me with any comments. An experienced colleague of mine prefers to write rather long emails pointing out important changes or provisions and why they are there, or why we did not make certain requested changes. Is this how I do it? No. Does that mean my way is right and his wrong? Also no. Have I insisted that he stop? No. See how well-trained I am?

Next time: are you a rational optimist?

David N. Feldman, founding partner of Feldman LLP, is the author of Reverse Mergers and blogs at crisispost.com and Reverse Merger & SPAC Blog. He can be reached at dfeldman@feldmanllp.com.

We've been everywhere, man. Youngstown, Ohio, where the local Business Incubator means to attract cutting-edge start-ups to the beleagured Rust Belt city; Detroit, which, even as its main industry faces decline, hopes to build its post-industrial industry (oh, and also to perfect the electric car); and to New Orleans, which is counting on entrepreneurs and small businesses to lift the Big Easy out of the water-logged muck it unfortunately still finds itself in, four years after Hurricane Katrina.

Now let's take a trip up north to Buffalo, N.Y. Home of the eponymous Bills (well, unless they move to Toronto, as has been threatened) and wings, it is another case of an industrial city gone to rust and still trying to figure out a way forward. The advantage to that, however, is that if you wanted to start your start-up in Buffalo--and say it's the type of start-up that doesn't necessarily need to feed off of others nearby, Silicon Valley-style (admittedly an obstacle)--then you can get all the basic benefits of city-living without the super-high costs. No wonder, as The Business Insider puts it, "the spaces where bread was manufactured are now the factories of Buffalo’s knowledge-based economy." Give it some thought!

Last week, we took a look at one way that various small businesses on Manhattan's Upper West Side are encouraging people to shop local: a "gratitude" day, thanking customers, presumably to some extent in advance, for patronizing their establishments. But journey south and across the East River to the artier confines of Bushwick, Brooklyn, and you'll find small businesses employing another method to achieve the same goal: the neighborhood is printing its own money!

The Brooklyn Torch will likely hit the bordering North Brooklyn neighborhoods of Bushwick, Greenpoint, and Williamsburg in a month or two. (Apparently, similar things have been done in notable college towns Ithaca, N.Y. and Madison, Wis.) Though the Torch will begin with a one-to-one exchange rate with the U.S. dollar, incentives that local businesses--the only ones who will likely accept the currency (although we suppose any business is free to do as it chooses)--to use the Torch might increase its value. Which would in turn increase the appeal of using them to shop at local businesses. And so on. Way, way cool.

Via Fortune Small Business, the Kauffman Foundation just published the fascinating results of a study, revealing that, contrary to the popular image of the entrepreneur as a young, loner, working-out-of-the-garage-type--say, a Bill Gates--most entrepreneurs started out middle- or upper-lower-class, are married with children, and already hold a bachelor's degree (almost half the time, they hold an advanced degree as well). The average entrepreneur's age? 40. "The commonly held belief that entrepreneurs are young college students working out of their dorms is simply wrong," said the study's lead author. "Rather, on average, they tend to be highly experienced, well-educated workers who have families."

Is this merely a fun fact, a nice little bit of trivia, perhaps? We don't think so. How we perceive the world reflects how we try to shape it. A perception that most entrepreneurs are incredibly gifted, fairly wealthy college kids--the Bill Gates model--would incline policymakers to institute policy designed to encourage entrepreneurship one way. But given the inaccuracy of that perception, policies designed with it in mind would necessarily have a detrimental effect on entrepreneurship.

Instead, given this more on-the-money picture of who entrepreneurs actually tend to be, we can design policy accordingly. For example, take the fact that over 90% of entrepreneurs grew up middle- or upper-lower-class: we can use that information to determine, say, that we need to redouble our commitment to making sure all kids in public-school have regular access to a computer, or to biology textbooks, or even to the sort of adult-imposed empowerment that convinces them that they, too, can start their own successful businesses.

Or take the fact that most entrepreneurs are not 22-year-olds who can afford to live at home and, if necessary, "throw away" a couple years, but rather are middle-aged family men and women. It might then make sense to provide a sufficient safety net for folks of such age and situation so that there is less discouragement for them to leave their current occupations and strike out on their own. For example: a health-care system in which your insurance is mobile from job to job, or in which decent insurance can be bought on an individual basis at a reasonable price, could go a long way toward helping the typical potential entrepreneur actually make the decision to give it a go. (Hint, hint.)

But the real point is we can only make these sorts of decisions if we have a good idea of what--and, in this case, whom--we're dealing with. That's why studies such as these are so valuable.

The New York Times has a helpful little article collating various bits of advice on a subject that must be foremost on the minds of many small business owners right now. It goes something like this: over the past several months, your employees not only have understood that a raise is highly unlikely, but frankly have been thankful merely to have a job. So the question of whether to give them raises has not really been, actually, a question at all. Now, however, the economy and many small businesses are in situations such that, from an employee's perspective, a belated raise might make some sense, but from an employer's perspective, this is still a time for hunkering down and trying to limit payroll expenses. You're the employer: how do you square the circle of continuing to withhold a raise while holding onto employees who are understandably antsy and who, at this point, might begin to have other options?

The article's overarching point appears to be: honesty is the best policy. The considerations that we listed above? Your employees are adults, and they can be made privy to them, too. Speaking with them honestly about why you value them greatly but do not want to give them a raise at the present moment (the experts are split on whether it is a good idea to promise future raises; we think it sounds like a bad idea) allows you to accomplish the following goals:
-You can rationally and persuasively convey your side of things.
-You give them the opportunity to air their side, which in many cases is all that really needs to happen in order to satisfy them.
-You make them feel as though you and they are in the same boat (which indeed you are!), and therefore that your best interests are their best interests.
-Finally, you extend the sort of trust and loyalty that you would want in return--which, in the end, are the real qualities that aregoing to keep your employees with you anyway.

Last week, we were hailing Robb Mandelbaum's reporting on the broad problems with the America's Recovery Capital loan program. Remember, under ARC, struggling but "viable" small businesses can get no-interest loans of up to $35,000 to pay back existing bank debt; these loans theoretically (but not always practically) are backed 100% by the Small Business Administration. The banks see little incentive and lots of potential risk in participating. This week, the also-excellent Emily Maltby, of Fortune Small Business, gets us some hard numbers on ARC's, er, success. Her summation? "While the list confirms that the program is likely to hit its goal of making 10,000 loans by the time it ends in late 2010, it also reveals that banks are still cautious about participating."

Digging deeper, Maltby finds that only a tiny percentage of eligible banks have actually made these loans--400 out of 8200 institutions. Moreover, among those 400 are mostly small lenders, with only three top-ten SBA lenders (Wells Fargo, PNC Financial, and Zions Bank) making the list. And it's not like they're rubber-stamping: Wells Fargo has approved 31 out of 17,000 (!) applications. (Maltby also notes a bizarre sidenote that Mandelbaum also flagged: namely, that the Midwest appears to be the place to go if you want an ARC loan. Banks in Minnesota and Wisconsin--states whose combined population makes up about 3.5% of the U.S. people--have made 28% of all ARC loans. Weird.)

Stats like these make us doubt the positive words of those such as Karen G. Mills when it comes to this program.

I thought I would be inundated with requests for America's Recovery Capital loans over the last few months at the bank I work at. But alas, small business owners across America know that the program is nothing more than rhetoric.

I finally put through one request that I thought should be approved. The funding would have given this particular client some breathing room to make it through this depression (yes, you heard me right: I dare to use the word). Not surprisingly, this client was declined. Why? Well, according to Small Business Administration guidelines, the business had to either show evidence of profitability or positive cash flow in one of the past two years. Unfortunately, this company had a loss of about $2500 in 2008. Never mind that it has been in business for ten years, and has been current on all payments. Or that it has personal credit scores of 685 and 745. Or that it has received a 20% increase in revenue for 2009 due to some new local-government contracts, and indeed that its cash flow projections show a return to strong profitability in 2009 and 2010. Apparently, a loss is a loss is a loss. It only took the bank ten days to come back with a rejection.

I was so outraged that I visited the SBA site to check on the progress of the ARC program and the list of participating banks and number of loans made by each bank. As this blog has noted, here have been a total of 1193 ARC loans made to date. Let's assume that each loan was for the maximum amount of $35,000. That comes to almost $42 million dollars in SBA support provided through the ARC program to America's entire small business community. Did you perhaps notice that I did not use the word billions?

The names of the banks that participated in this program were, for the most part, unknown to me. Most of them were not any of the big banks that have received so much help from the government (or, more correctly, the taxpayers and citizens of this country). Bank of America and Citibank were not listed as lenders. (Regions, Sun Trust, and Wells Fargo did appear on the list, along with JPMorgan Chase.)

It's impossible to tell exactly how many ARC loans were made by each bank. In President Obama's new age of transparency (yes, I'm being sarcastic), the SBA website did not see fit to break out the totals for each bank. The SBA gives the impression that it does not want anyone to be able to do a simple tally.

The stimulus package allocated a mere $255 million dollars for ARC loans to the entire U.S. small business community. Now, it is falling short of even my lowest expectations.

I expected that those paltry funds would be gobbled up in the first 60 days of the program. But, actually, not more than 16% of the funds have been dispersed through the banks. Is this because the small business owner is not really suffering through this economic crisis? No one could possibly believe that! Or perhaps the banks, which we have bailed out, have once again refused to meet their fundamental role as lenders?

And if the applicants are not qualifying for loans under this program, then what does that say about the state of this nation's economic recovery? Wake up and take notice. The ARC plan has failed. And the government's transparent abandonment of the small business community in your economic recovery plan is quite clear to all of us. If this is the best it can do, then this country is in big, big trouble.

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

Ah, air conditioning.

Cuban on the business proposal. Famed Dallas Mavericks owner/hugely successful entrepreneur on how not to get someone to invest with you. MUST READ. [blog maverick]

Blodget on the axe. Famed former investor on how to fire people. [OPEN Forum]

Selves employing themselves. Good news on the self-employed jobs front. [You're The Boss]

Seven steps for retailers. How to survive what remains of the recession. [FastUpFront]

A swift kick in the pants. Rieva Lesonsky asks if it's time to reboot your business. [AllBusiness]

The bullseye on your back. If you're a midsize company, get ready to entertain purchase proposals. [NYT]

A recent article in Business Week was headlined: "As Bankruptcies Surge, Fewer Emerge." Turns out, business bankruptcy filings are up more than 40% from a year ago, and banks are pushing still more companies to liquidate.

This latest by-product of whatever you choose to call our current economy and business environment highlights an important--but until now overlooked--advantage to a qualified retirement plan. And that’s protection from bankruptcy. It’s a complicated topic, but here are the highlights.

Since the inception of the Employee Retirement Income Security Act of 1974 (“ERISA”), participant accounts have been protected assets. That is, they cannot be alienated or assigned. That’s been the general rule, and since 1974, the case law and federal law have evolved.

Additionally, in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”--how about that for an acronym?) went into effect, where it refined bankruptcy protection for retirement plan accounts even further. In brief, BAPCPA exempts from the bankruptcy estate the following assets held in retirement plan accounts:

* Qualified retirement plans,
* 403(b) plans
* 457(b) governmental plans
* traditional and Roth IRAs (up to $1 million)

There is no $1,000,000 limit on rollover IRAs, SEPs, and SIMPLE IRAs because they each have an employer-contribution component.

In addition, BAPCA settled a long-standing conflict between ERISA and the Bankruptcy Courts by requiring that plan participants must now continue payments on their qualified plan loans rather than suspending them.

As with all laws, there are exceptions. A participant’s assets are not protected from 1) a federal tax levy, or 2) a Qualified Domestic Relations Order (“QDRO”).

But what if the retirement plan participant is not subject to the jurisdiction of the federal bankruptcy court, but instead is involved with a debtor-creditor issue on the state level? That’s a story for another time, with the answer found in a complicated set of rules governed by federal and state rules and case law.

I’ll conclude by providing the usual caveat: This article is for informational purposes only. It is not to be considered legal or tax advice. For specific legal or tax questions, the reader should consult a licensed attorney or CPA.

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.

Here's one way to cure the unemployment blues: create your own job, in effect, by starting your own business! The Sunday New York Times ran a prominent story on the subject. Flagging the same Kauffman Foundation study that we did last week, the article notes that 2008 saw a slight uptick in the number of businesses created from 2007, and hypothesizes that the "post-traumatic growth" phenomenon deserves the credit for that trend. (Actually, as we have pointed out, none other than the U.S. Census found that single-person businesses have jumped.) The article also offers a behavioral-psychological explanation for the fact that entrepreneurs are drawn to down times even though it is more difficult to succeed during them: "some people become more resilient when faced with adversity, says Shawn Achor, a Harvard researcher. Creativity surges, he says, as they adapt to a new situation."

A few other things become apparent upon reading the article (which you should definitely do).
* One start-up involves a brother-sister team selling bicycle bags. A prime way they have done so is through the start-up-like online marketplace Etsy. The point is that small tends to mesh well with small.
* Relatedly, and whether the prospective business is explicitly in the tech industry or not, the Internet has made starting up almost incomprehensibly easier and cheaper than it used to be. If anything, the Great Recession should feature the Great Rearranging for this reason alone.
* You want to know what would make it even easier for the talented-but-laid-off to start their own companies rather than look for one of the few pre-existing jobs still out there? A health care system that gave them reasonable coverage. Just sayin'.

We close with this fact from the article: "Research from Kauffman in June found that more than half of the companies on the Fortune 500 list in 2009 and nearly half of the companies on the Inc. magazine 2008 list were founded during a recession or bear market." Some Monday afternoon food for thought.

Earlier this month, we predicted that if New Orleans is going to pull itself back up to something like what it used to be before the devastation of Hurricane Katrina, entrepreneurs were going to play a crucial role. We still think that's the case, and in fact, as Fortune Small Business reports in a new article, there is something in the realm of $26 billion (with a "b") for New Orleans to spend in reconstruction funds. But the article's not about the reconstruction funds. It's about the fact that a hugely disproportionate number of the city's black-owned businesses--out of a pool of black-owned businesses that was disproportionately small to begin with--have failed over the past several years, and indeed there is a concern that the legal encouragement that at least 35% of all public financing go to minority and woman-owned businesses will not be able to be honored simply because there are not enough businesses to make it work.

The one other thing we'll point out is that a particular difficulty for minority-owned businesses, according to the article, is a lack of operating capital--a problem that in turn derives both from the much broader dynamic that, yes, blacks tend to be less wealthy than whites, but also from the much narrower dynamic that it tends to be more difficult for black-owned businesses to access needed credit. This is not the first time we've covered that issue. We hope that as the Small Business Administration continues apace with its work of ensuring the steady flow of credit to small businesses, it takes measures to attempt to rectify that inequality.

Credit lines--in which you can incur and pay back debt from a bank with astonishing flexibility up to a certain level, being charged interest only for the amount actually outstanding--is one of the most advantageous forms of credit for small business owners. So, how do you get in on that? A post over at OPEN Forum (published by our sponsor, American Express OPEN) has a lot of the technical details: collateral (particularly real estate collateral) is highly valued by prospective lenders, as is cash flow, personal debt, and type of business. Here's a huge shocker: it's more difficult than ever before to get a bank to agree to extending one of these your way, to the extent that the post's featured expert advises small business owners simply to reduce their need for outside financing rather than actually go for one.

Yet for every pessimistic post, it always seems, there's an optimistic one. Fortune Small Business runs the story of a husband-and-wife team that launched a small environmental engineering firm in New Jersey, and after being turned down for a credit line, determined to work on their personal relationship with their banker, did just that, and eventually secured a whopping $200,000 line.

Back to the first point, about reducing your need for financing: You're The Boss this morning pointed to data showing that financing sources for small businesses actually did not change much over the past two years...unless you're talking start-ups, far fewer of which required outside financing in June 2009 than did in June 2007, back when credit was much more available. Lesson? You can write the need for more or less financing right into your business plan. Now might be the time to plan for the "less" option.

The conventional wisdom is that during down times, you discount; most recently, we noted that even so indelibly premium a brand as Vogue is in on this trend. And several months ago, we reported that Starbucks, too, had launched something of a rebranding designed to present itself as a more cost-effective way for people to get their daily caffeine fix, even as cheaper competitors like Dunkin' Donuts and McDonald's made significant inroads. So it should come as no surprise to learn that Starbucks is further lowering its prices. ...Wait, what? It's raising its prices?

Admittedly, not by much at all. But, yes, some the prices of some of Starbucks's premium drinks will go up. From a pure business perspective, the argument is that those folks who are already willing to buy Starbucks drinks--which remain significantly more expensive than those of its low-cost competitors--will certainly be willing to pay just a little bit more, which won't exactly hurt revenues. But also (and here's what's relevant to all businesses that fancy themselves premium enterprises), from a branding perspective, more expensive drinks is almost an marketing ploy in and of itself3: the price itself communicates non-fiscal value to the prospective customer (the wannabe grad student in us compels a mention of commodity fetishism, which you should probably ignore).

There are two lessons here.

One is: if you've got it, flaunt it. All the cost-cutting in the world is not going to change the public's perception of Starbucks as a place to go for a good, and therefore more pricey, cup of coffee. Better for Starbucks to go with that current than to try to fight it; better for it to play its own game, than to try to play Dunkin' Donuts's.

Which brings us to a second lesson: quality matters. That therefore is crucial--people will pay more for good coffee if it's actually good coffee (and they will pay more for what you're selling if it's actually better). In Starbucks's particular case, maybe they should be slightly less concerned with their communicative-branding pricing strategy and more with the actual quality of their coffee, which in a recent Slate taste test did not quite match up to, yes, Dunkin' Donuts's.

Inc. has a list of the top ten U.S. metropolitan areas for entrepreneurs, based mostly on how many companies on the Inc. 500 list each plays host to. We don't want to divulge the whole thing; suffice to say that while the members of the list probably won't surprise you all that much, the exact rankings might.

Meanwhile, one town not on the list that nonetheless has a great scene for entrepreneurs is...Detroit! This is becoming a favorite theme of ours (one, two, three): Detroit and its native auto industry may be reeling now, but that means that costs are low and opportunities are high for talented and hard-working entrepreneurs to come in and make something happen for themselves and for the beleagured city. Fortune Small Business reports today on a Detroit business incubator called TechTown (we've previously discussed business incubators in Youngstown, Ohio and in Brooklyn) and the steps it is taking to encourage entrepreneurship in the Motor City. Check it out. And maybe check out Detroit as well?

Not our usual writerly jurisdiction, but we wanted to remind our readers that if they enjoyed voting between the ages of 18 and 21, there's someone they should take a moment to give thanks for.

Last year, there was a bit of a scandal when it turned out that roughly $5 billion in federal contracts that were reported as having gone to small businesses actually went to very large businesses (usually via subsidiaries), and that the 22% of federal contracts that actually did end up going to small businesses fell short of the 23% legal requirement; moreover, many other legal requirements, concerning department-by-department procurement standards for small businesses and woman- and minority-owned businesses, were not honored.

So, did the federal government improve on last year's debacle? Actually, if anything, things got even worse. The Small Business Administration reports that 21.5% of all federal contracts went to small businesses in Fiscal Year 2008 (which ended last October). For those of you keeping score at home, that figure falls short not only of the 23% mandate but of last year's 22% score.

You're The Boss's Robb Mandelbaum is the must-read here: he is at once funny and devastating on the SBA's valiant but futile effort to put a positive gloss on what is, frankly, bad news.

In places, the SBA made his job easy: bragging about a record-high amount of absolute contract dollars instead of admitting that the far more relevant percentage of dollars actually fell does have the effect of making the SBA a bright red target.

But Mandelbaum is also quite shrewd. There's a key dynamic whereby the percentage is taken from the total dollar-figure of all contracts made by agencies and under circumstances to which the 23% mandate applies--those which are, as the SBA calls them, "small business eligible". But the term is misleading: it excludes contracts that could, theoretically, go to a small business (which would be the literal definition, it seems to us, of "small business eligible"). Include all of those contracts in the calculation, and the central figure drops to closer to 19%.

And even these calculations, of course, do not broach the even bigger problem: that even that 21.5% or 19% figure could very well be phony, with many of those ostensible small-business contracts in fact having gone to the some of the world's largest corporations. In its response, the American Small Business League--which essentially exists to try to rectify this problem--claims that some of those contracts in fact went to Lockheed Martin, Boeing, Dell Computer, Xerox, Home Depot, Northrup Grumman, General Electric, AT&T, and Rolls-Royce.

Mandelbaum accuses Sen. Mary Landrieu (D-La.), the chair of the Small Business & Entrepreneurship Committee, of going soft in her tepid statement on the FY 2008 numbers. The ASBL suggests that we pass the Fairness and Transparency in Contracting Act. Here's our idea: Sen. Landrieu could lead the charge. August recess will be over before long....

Thomas Heath writes an excellent weekly column on D.C.-area small businesses for our sister publication, The Washington Post. But this week, we are going to have to take limited issue with his work. The column is about the recent burst (a half-dozen new ones in the past two years) of "cupcakeries"--wanna guess what they sell?--with a focus specifically on Georgetown Cupcake, which is moving its flagship location to a larger space and is also opening a second location in the tony Maryland suburb of Bethesda. So what's our beef? Well, as astute BizBox readers will recall, we're afraid that we're Baked & Wired partisans: please check out our extensive interview from several months ago with the owner of that cupcakery here.

We can talk about actual health-care reform all we want--and, to be sure, we have, and we will--but that won't change the fact that substantial reform, that genuinely cuts costs and makes it easier for small businesses to provide insurance to their employees, is practically a whole while off. So in the meantime, what steps can small business owners take to work within the current system and offer insurance without breaking the bank?

The Wall Street Journal offers up a very helpful article with seven specific tips. The broader concept embodied in several of these is: spread your risk around. Whether by forming a group, bundling services, or joining a purchasing coalition, a major plus is to involve multiple parties in your insurance, and dole out multiple stakes. (It's worth pointing out that pooling, which would enable disparate small businesses to join together and negotiate lower rates, is a crucial component to the reform hopes of some.)

One other tip we like: invest in wellness programs, which educate and encourage your employees to engage in behavior that promotes their health. A healthier workforce justifies high-deductible plans, which are less expensive. And let's remember: the best health insurance is not getting sick in the first place.

Scott A. Shane of You're The Boss asks: "If only some entrepreneurs expect to create jobs, and those who expect to create jobs are more likely to do so, should governments focus their attention on entrepreneurs who expect to create jobs? Or should they treat all entrepreneurs equally?"

Though the jury is actually still somewhat out on the question of whether small businesses actually are responsible for a disproportionately high share of jobs created in the United States, perhaps the most common talking point you hear from politicians and activists, on both sides of the political spectrum, who are advocating some pro-small business measure is that helping small businesses is synonymous with helping everyone, because small businesses create jobs, etc.

We like to think of that as a useful talking point, but a talking point nonetheless. If it helps put more pro-small business policies in place, then great. But not at the expense of helping small businesses that are perfectly fine keeping hiring stagnant and just generally humming along without particularly ambitious growth plans and the like. Rather, we think the government should treat all entrepreneurs who play by the rules and want to make a living for themselves and their families equally.

We are habitual credit score worriers. We have been concerned that many small business owners will see their credit scores fall--making it yet more difficult for them to borrow money--through no real fault of their own, but rather through various technicalities that all derive from the general scarcity of credit right now.

So we feel a bit relieved reading this article from the Washington Post's personal finance columnist, which uses data to show that our fears are probably overblown. Plenty of people who reported reduced credit lines enjoyed no change to their credit scores afterward--and plenty more enjoyed a positive change!

It seems, rather, that credit score, which is to be sure a highly imperfect metric, is nonetheless ultimately dependent upon what it says it is dependent upon: the holder's reliability as a debtor. And the way to maintain a high credit score--which is absolutely a crucial thing for any small businessperson--is largely through being a reliable debtor. So go forth and borrow. But do so responsibly.

As the practical failure--or, at least, lack of real success--of the America's Recovery Capital lending program becomes ever more apparent, John Tozzi of The New Entrepreneur offers a potential solution: encourage microlenders to make the loans. (ARC loans, which arose from the February stimulus package, are zero-interest and 100% government-backed, for struggling but "viable" small businesses with pre-existing debt.)

His reasoning makes sense. These are, after all, microloans--they're capped at $35,000 apiece. And to date, most of the loans have been made by small, midsize, or even large banks, as well as credit unions, rather than microlenders (Tozzi is unclear on whether microlenders would be eligible to administer ARC loans as the program is currently set up). Additionally, microlenders are not new to the world of lending to U.S. small businesses: none other than Kiva has expanded its services to them.

The problem with this suggestion, as far as we can see, is that microlenders have even less incentive than banks to make ARC loans. The crucial aspect of ARC to remember is that loans made under it are intended to pay back pre-existing bank debt. So for a bank with a small business in debt to it, securing cheap money, backed 100% by the Small Business Administration, might make sense despite the risk that the government will end up not covering a default as well as the relatively poor compensation (prime rate minus 2%) that the bank receives from the government for making a loan under the program.

But microlenders will likely lack this incentive. On top of that, while for even a small bank a defaulted and un-guaranteed loan won't cause lasting devastation, it really could hurt microlenders' bottom lines, since more than other types of lenders they depend upon exceedingly low default rates. (And remember: despite the fact that, officially, these loans are government-backed 100%, even SBA Head Karen G. Mills has admitted that, practically, there will be a small fraction that the government will end up deciding it is ineligible to back.)

Combine all these obstacles with the onerous hoops that must be jumped through to prove that a prospective borrower is both struggling and "viable"--both key conditions of ARC loan eligibility--and the typical microlender could be very much forgiven for asking why it should possibly be asked to step in and save ARC.

And that's just the point: Tozzi's appeal (and this is admirable, and not really his fault) is not to the microlenders' self-interest, but to the interest of the ARC program. But why should microlenders be asked to clean up the federal government's mess? What we would prefer to see happen is to see the government take a more direct hand in extending limited credit to those struggling-but-"viable" small businesses that could really use the extra help.

Because while the federal government created the mess of ARC, the real mess is the small businesses'. Put it another way: the government's not going to go bankrupt if ARC fails, but there are many businesses that just might.

Hopefully you're on vacation, as Newsweek suggests you should be. But surely you can still find the time for some weekend reading.

"Talent Isn't Everything." What else to look for when hiring. [OPEN Forum--published by our sponsor, American Express OPEN]

Take it easy. Hulu's head says a laid-back office is a happy office. [NYT]

Get financing, and keep the company, too. How to secure cash without overdilution. [AllBizAnswers]

Cloud nine. A very technical, and well-laid-out, case for the move to cloud computing. [bMighty]

Basement tapes. How a small business that keeps basements dry is now flooded...with black ink. [SmallBizTrends]

We've talked a ton about the policy and the larger, macroeconomic implications of changes to the Small Business Administration's flagship 7(a) lending program. (Under the program, banks make the loans, which are then backed anywhere from 50% to 95% by the federal government, depending on your business and the size of the loan, which can reach into thousands and thousands of dollars.) However, we've touched less on what these changes mean practically for the typical small business owner. Fortunately, here comes the Wall Street Journal, with a fantastic piece, firmly in the not-afraid-to-be-servicey vein, explaining a few things you can do to increase your chances of securing a 7(a) loan, and of securing one fast.

And time is of the essence! As the Journal mentions, the February stimulus package funded several initiatives designed to make credit flow more freely through the 7(a) program--most notably, the outright elimination of fees (!) and an increase on how much the government will guarantee. But rather than fund these little bonuses for a given period of time, it allocated a certain amount of money--$375 million, as it happens--toward implementing them until the fund runs out. And over half of that well has already run dry: it's estimated to be mostly sand by November and December. So now is the time to go for it! (Especially since the loans have 120-day approval process!) So what do you do?

We suggest you read the whole thing, but a basic summary would go something like:
Up-to-the-minute paperwork. They tell people trying to rent an apartment in New York City the same thing. Have all your financial statements (at least three years' worth) ready so that you can submit it at the drop of a hat. Because if you don't, someone else will.
Pick a lender, not just any lender. Not every bank offers SBA loans, or many of them; you should try to go with a preferred lender. And even among preferred lenders, certain ones may be more (or less) likely to lend to a business of your size or even in your industry. Do your homework. Of course, the best bank to bank with is the one you're already banking with, with which the relationship is more personal.
Pick lenders, not just any lenders. Remember when you were trying to get into college--did you apply to just one school? Of course not. Same goes here. You still only have to say yes to your favorite.
Pay them your money down. One of the advantages to SBA loans is they typically require less money down. Sacrifice that advantage: offer to put more down as an enticement; consider guaranteeing yet more of the loan (say, whatever the government doesn't). It will increase your chances of getting the loan, and there are still plenty of features that make loans under the program advantageous.
Question box. Consult an expert (such as one at SCORE). He or she could speak to the particulars of your situationm, and might even have thoughts that the Journal did not!

Splendid video for you on this lazy late-summer Monday afternoon. MSNBC talks to a small business owner and a spokesperson for the Main Street Alliance, a group that lobbies for a progressive vision of health-care reform--including the public option--from the perspective of the country's small businesses. Especially notable is their take on the mandate, which would require businesses either to provide insurance or pay a percentage of their payroll. Even adjusting for the ways in which the mandate's burden will be lightened for small businesses--which would turn out to be some system of exemptions and tax credits--small businesses do know they're going to have to pay something. But in exchange, they're getting a more leveled employment playing field. And, besides, everyone needs to contribute to the health care crisis in this country, and even the most ardent small business advocate should see no exception for small businesses.

Yesterday, the New York Times trained its eye on one of our favorite themes: the central role that entrepreneurs and the small companies they build will likely play in the revitalization of the national economy, and those of particularly devastated cities, as we all begin to climb out of the Great Recession. Specifically, the paper looks at arguably the most devastated city: New Orleans, which still finds itself in a hole--albeit a hole that they plan to spend billions building a ladder out of--four years after (almost to the day) Hurricane Katrina. (Indeed, we've already covered both New Orleans's extensive entrepreneurial opportunity and the unfortunate racial disparity within that opportunity.)

The key to understanding what's going on lies in the distinction between reconstruction and revitalization. The Great Rearranging--the name we've coined for the economic rebooting now getting underway in America that will see slimmer, more flexible companies lead the recovery and knock off some of the bigger, more established names in the process--is about revitalization as much, if not more, than reconstruction. New Orleans is a perfect example: the object for these entrepreneurs is not exactly to get back to where the city was before the flood, but actually to use the relatively blank slate that the flood provided as an opportunity to build a fundamentally better city.

And so, a certain energy "is there among the swaggering entrepreneurs, who have set up small branding firms, music licensors and green energy companies in the downtown warehouses," the Times reports. "Over drinks at a downtown boutique hotel, they seem largely untroubled by the reluctance of Fortune 500 companies to bring their headquarters here. This is not a town for old-line corporate thinking. This is a town for pioneers, risk-takers, they say."

Do read the whole article. It should give you a sense of why we are so insistent on covering this story. it's not just that it's going to be essential to understanding entrepreneurship, and small businesses, and the economy generally, over the coming months and years. It's also that it's exciting and epic, and even inspiring.