The recent unemployment claims have made it urgent for President Barack Obama to take congressional action on legislation so as to cut taxes and ease credit flow. The legislation that Obama wants to promote would ease loan terms and provide up to $12 billion in tax breaks to small businesses. Banks with $10 billion in assets will also receive $30 billion so as to encourage lending to small businesses.

The legislation is opposed by Republicans like Senator Richard Shelby of Alabama as he says that it is a government rescue measure similar to the $700 billion bank bailout of 2008. Banks may have to grant risky loans. Obama, however, urged Republicans to stop blocking the measure and prodded lawmakers to consider the bill when they reconvene in September.

The economic index of the Federal Reserve Bank of Philadelphia fell to minus 7.7 this month from 5.1 in July. The below zero reading indicates contraction in places like Pennsylvania, southern New Jersey and Delaware. Obama says “Small businesses and community banks that loan to small businesses have been lagging behind.” He adds that the report of Labor Department “compels us to act.”

During the congressional and state elections in November, ‘economy’ is going to be a top issue for voters. Obama said, “There will be plenty of time between now and November to play politics. Let’s put aside the partisanship for a while and work together.”

Many small businesses are happy to make a profit period, but if your business is coasting along with the same profit margin for a long time, you could be headed for trouble.

Many businesses build to a certain level, hit a plateau and remain there. That stability can turn into stagnation, says small business owner Ivan Widjaya on www.noobpreneur.com.

A stable profit margin can mean you’re not generating new leads. You may be holding on to existing customers, which is great, but what happens if a customer or two cuts back or stops doing business with you altogether?

If you don’t want to find yourself in that precarious position, you should always be looking for leads. You’ve probably heard it before, but it bears repeating: The best place to find new leads is at local small business networking events.

Start by visiting your local Chamber of Commerce to find out when they hold meetings and which other local businesses are involved. Attend those meetings and get to know like-minded business owners in your area so you can share tips, marketing strategies, and build working relationships and friendships. Remember, people will help their friends first.

Opening or investing in a small business is always a gamble, but investor Jack Stack, who has acquired or invested in more than 60 ventures, has picked up some valuable insights about evaluating the potential success of a new business.

Stack, the founder and chief executive of SRC Holdings in Springfield, Mo., is one of the foremost practitioners of open-book management, which means that all employees are privy to information about a company’s finances. Employees are taught how the business works and how they can be part its success.

While Stack has had a hand in many successful ventures, he’s also seen his share of failures. In a blog in the New York Times, Stack says those failures helped him develop three questions to ask when evaluating a business’ potential.

1. Does the company produce positive cash flow? To be successful, every business needs a steady cash flow, which requires managing the spread between payables and receivables. A business need to get paid before its bills are due.
2. Does the company cover its costs? Ask if the business can absorb its own overhead. That means they must break out the fixed costs from the variable costs. The fixed costs are the ones that don’t fluctuate with volume, like rent.
3. Can it be diversified? Is the company capable of producing different products and services, or can it expand existing products and services to new markets. A businesses shouldn’t put all its eggs in one basket.

Stack says business owners need to ask themselves these questions and look at the business as an outsider would. “If you don’t like what you see,” he says in the blog. “It’s time to begin making some changes.”

The National Federation of Independent Business (N.F.I.B.) has decided to back Cory Gardner, a fast-rising member of Colorado’s House of Representatives in the general election campaign. The N.F.I.B has declared to contribute $5,000 which according to Sharon Sussin is the maximum amount permitted by law. The group has also decided to invest in advertising for the campaign, both in traditional and online media.

In the endorsement announcement, the N.F.I.B. committed itself to inspire its Colorado members so as “to help turn out the small-business vote on Gardner’s behalf on Election Day.” N.F.I.B. has 7,500 members in Colorado out of which 1,700 are in the Colorado’s Fourth district where Gardner is going to contest.

Mr. Gardner describes himself as a “leading conservative in the State House” and is a proponent of limited government and common-sense principles that includes economic growth on the basis of lower taxes. Mr. Gardner also has endorsed renewable energy transmission projects and backed state government loan guarantees. For this he also wrote legislation to launch the ‘Colorado Energy Development Authority.”

Ms. Betsy Markey has also contested from Colorado’s Fourth District and was elected in 2008. She comes from the ranks of small business as she owned and operated two small businesses. Ms. Markey is the most vulnerable in the 2010 mid-term elections as N.F.I.B. has declared her as a Republican opponent.

Democrats and Republicans can agree on at least one thing – an economic recovery hinges on the success of small businesses. But that’s about where it ends.

President Barack Obama stopped by the Tastee Sub Shop in Edison, N.J., earlier this week to tout a bill making its way through Congress that he says will provide tax breaks and spur lending to small businesses, reported the New York Times.

Senate Republicans have blocked the bill, saying that the $30 billion lending program will raise taxes on small businesses and encourage community banks to make risky loans. And with mid-term elections just weeks away, Republicans are loathe to hand Obama and the Democrats another legislative victory, said the Times.

It’s not the first time Democrats and Republicans have battled over which party is a better friend to small business – and it won’t be the last.

Republicans opposed the president’s health-care reform bill, in part, because they said it would hurt small businesses. It appears the GOP will take a similar tack in the upcoming debate about extending President Bush’s tax cuts on the top two income brackets, said the Times.

The tax benefits are set to expire in the fall, and Republicans, along with the United States Chamber of Commerce and the National Federation of Independent Business, say small business owners will be hurt if the cuts aren’t extended.

The tax increase would affect only individuals making over $200,000 and families making over $250,000. Democrats say only 3 percent these top earners show any business income, so the majority of small business owners will benefit from the change.

In the meantime, Democrats are trying to push small business advocacy groups like the Chamber of Commerce to support the $30 billion lending bill.

Sen. Mary Landrieu, a Democrat from Louisiana and chair of the small business committee, contends that 81 percent of the jobs lost during the recession were from small business, said the Times. She and other Democrats are counting on the bill’s passage to jump-start the economy.

Mr. Walt Minnick, the Idaho representative is considered the most conservative Democrat in congress. In 2008 presidential elections, he took his seat by just 2 points. He gained support from unlikely sources like the United States Chamber of Commerce and Tea Party Express. Minnick started his political career as a Nixon administration official. But he resigned after the Saturday Night Massacre in which Attorney General Elliot Richardson was assassinated.

In his early years, Walt Minnick remained a successful businessman. He did a job with Trus Joist, a $30 million Boise based forest product company. He served the company for 21 years -16 years as president and now the company’s revenue is $700 million. He says “I realize I liked Trus Joist a whole lot better when it was a $70 million company than when it is 10 times that size, and bureaucratic.” Following this, he started his own business that dealt with nurseries. He comments, “I learned it as boss, but I’d take orders from anybody, depending on what job I was doing. Now, that’s good training for being a congressman.”

While in congress, Minnick introduced a bill meant for resuscitating local banks and to address other small business issues. Minnick points out key issues related to the current recession.

No business, credit demand

Minnick comments that the current recovery is ragged and uneven. Some businesses are going gangbusters, some are seeing small improvements, and others are trying to hang on by cutting costs. So, only businesses that have a sound base to expand and are improving can ask for credit. The rest cannot ask for loans from community banks and other financial institutions and this is the reason why the recovery is faltering.

Corrupt Banking system

The market value of the commercial real estate does not support loan values that are outstanding. Under such a case, the borrowers are found not to possess the reserve equity that can downsize the borrowed loan. In many cases, borrowers are forced to default on loans. The banks then resell the property at distressed rates. The F.D.I.C. also wants a one-to one ratio and is asking banks not to renew loan terms but to get rid of them.

Federal Government’s Role

Federal Government should quit spending money that it does not possess and restore the banking system. Pump-priming should no longer continue. Minnick says “Quit throwing money at the problem. Balance its budget. Quit digging the deficit hole deeper.”

Possible solution

Minnick says that his bill encourages large financial institutions to buy small loans and compile them into market-sized packages. The bill will also have the provision to allow the treasury to give federal guarantee to investment packages like quality, performing loans, so that they can be sold in institutionalized markets.

The US economy has started to show signs of growth as business expanded at a faster pace than expected in July. Major manufacturers like Caterpillar Inc. is forecasting a rise in earnings following the demand from developing countries.

Jim O’Sullivan, chief economist at MF Global Ltd. Says, “Export growth is still pretty strong and domestic demand has shown some gains.”  According to a Commerce Department report, growth slowed in the second quarter to a 2.4 percent annual rate that is much less than the forecast.

Slowing Economy
GDP increased and showed 3.7 percent in the first quarter compared to a forecast of 2.6 percent surveyed by Bloomberg.  Since 1997, business investment climbed at the fastest rate.

Following the reports, stocks jumped to erase previous losses.  The S&P 500 Index rose 0.1 percent to 1,102.34 at 11:04 a.m. in New York.  The treasury climbed pushing two year yields to 2 basis points, a  0.02 percentage point, to 0.57 percent.  The Thomson Reuters/University of Michigan final index fell to 76 compared with a preliminary July measure of 66.5.  Economists suggest that the Chicago group’s gauge would fall to 56.

Employment gauge rising
The Employment production gauge increased to 65 from 64.2 and employment measure rose to 56.6 from 54.2.  The inventory gauge rose to 50.8 from 46.5.  The New orders gauge climbed to 64.6 from 59.1.  The backlogs index rose 57.6 from 50.7.  Economists are eyeing the Chicago index along with other regional manufacturing reports.  Chicago has membership of both manufacturers and service providers that makes the gauge of measure for overall growth.

National Indices
According to median forecast of economists, the ISM’s monthly national factory index may drop to 54.2 in July to 56.2 the previous month.  The index averaged 53.9 in five years.  Caterpillar has raised its earning forecasts in developing countries for sectors like mining, energy and rail equipment.
Ed Rapp, officer at Peoria, an Illinois-based company, says, “You’ve got strong growth in India and China that provides demand for commodities. Most of the mining is happening in the developing parts of the world.”

The recent recession was deeper than previously thought, according to new data released by the Commerce Department. The numbers show the sharpest declines in consumer spending and the housing market.

The U.S. economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, compared with the 3.7 percent drop previously reported, said Bloomberg News. 

Household spending fell 1.2 percent in 2009, twice the previous projection. Consumer purchases, which account for 70 percent of the economy, shrank the past three years, with the lowest spending point being last year, said Bloomberg.

Personal and disposable income levels actually rose between 2007 and 2009, according to the Commerce Department report. Higher income and less spending indicate American’s are putting more of their money into savings.
Economist Stephen Stanley told Bloomberg that consumers are adjusting to a “more rational spending philosophy.”
In a piece of good news, the economy grew 2.4 percent annual rate from April through June this year, according to the Commerce Department. The rate of expansion in the first quarter was 3.7 percent, higher than the 2.7 percent gain previously predicted. 

Microlending is now the buzz word in America when it comes to giving loans to entrepreneurs.  Kiva and Grameen Bank, two microfinance groups are well known for the support that they provide to small businesses operating in America and abroad.  Kiva, an international microlender, has already lent $150 million in 53 countries.  Grameen Bank, that has its foundation in Bangladesh, has lent $9.4 billion through over 2,500 of its branches worldwide.Branding itself as ‘Grameen America’ the bank has opened one branch in Omaha and four new branches in New York.

Microfinancing works with a mission to alleviate poverty and not just to make a profit.  Microlenders see the passion and commitment of applicants toward their businesses.  So, they insist loan recipients to attend workshops on marketing, business plans and money management to ensure their success.  Grameen also makes it mandatory for its borrowers to become a member of an entrepreneur’s group that conduct meetings every week.  It also makes it compulsory for borrowers to save at least $2 from their weekly income.

Kiva has helped 137 American companies receive $900,000 in loans, since its American debut.  Overseas the borrowers can get $3000 and in the US they can receive $ 10,000.  There are many examples of such recipients.  Ms Amanda Keppert, who runs Mandy’s Korner, a hot dog stand in San Jose, California, received a $6,500 loan from Kiva.  Her sales plunged 60 percent and she is convinced that her business would have collapsed if she had not received a micro loan.  Her loan carries a 6 percent interest rate and has three years payback time.  The pilot program, Opportunity Fund, that Ms. Keppert attended is available in California and New York now.  Premal Shah, President of Kiva says, “People talk about buying local — why not lend local?  It’s a personal stimulus package if you’re the working poor.”

Mr. Craig Adams wanted $50,000 loan for opening a restaurant and event space.  His long time bank turned him down on the pretext of his debt and then by a second bank.  He finally received a $15,000 loan with 12 percent interest from ‘Justine Petersen’, a microfinance group having its base in St. Louis. Mr. Adams says “It’s not the greatest way to go, but it’s the only way to go.”

Kiva works like a middleman, and has teamed up with microfinance groups, maintains a website www.kiva.org, where individual entrepreneurs’ profile and loan requests are uploaded. People then can lend money through a microlender to an entrepreneur.

Grameen Bank plans to open offices in Washington, Boston, San Francisco and Charlotte. N.C.   Grameen, helps people below the poverty line with first time loans of $1,500 having an interest rate of about 15 percent.

Biz2Credit has partnered with many microlenders as well, including ACCION and Seedco Financial to provide business owners in our network access to micro loans.

Apple Inc is planning to undergo a major expansion. The company that has products like the iPhone and the iPad is now targeting small business. They are planning to hire engineers in at least a dozen U.S retail stores to install Apple computer systems meant for small businesses.

This expansion makes sense given that there are already thousands of businesses that run on Apple products, the company has now focused on consumer and niche markets such as media firms and design. Apple wants to use the iPhone and iPad as selling points to leverage more expensive products like Macintosh computers and servers. It is using its 300 retail stores to reach out to local businesses. Apple is also recruiting from within the sales staff so as to form a specialized team to negotiate leasing and pricing terms for customers.

It is unlikely that Apple would be facing more competition from competitors like Hewlett-Packard Co. and Dell Inc. But Apple is eyeing the $310.8 billion that North American businesses are expected to spend on information technology this year. The figure will rise to $328.3 billion in the coming year. By capturing the sales, the annual revenue of Apple can grow up to 46% amounting to $62.6 billion in the current year. Brian Marshall, analyst in Gleacher & Co., says, “They’re well aware of the opportunities in business. This is something they’re focusing on even if they’re not talking about it publicly.”

A Virginia-based MacPro Solutions owner, Allen Cleaton, says, “Almost half of our new customers come from the Apple Store.” Cleaton can find local business as Apple’s general staff do not have the expertise to handle set up and maintenance of business computer networks. Apple just maintains an expert team for government agencies and big companies. As far as small and mid-sized businesses are concerned, it currently hands over responsibility to its retail stores. But now, Apple is updating its retail stores with conference rooms meant for meetings between sales team and higher echelons of business executives in order to equip their expansion plans.