New data from payroll companies suggests that small businesses are slowly beginning to add employees, even as the most recent Labor Department report shows the unemployment rate held steady at just under 10 percent. Some economists believe these numbers indicate the recession is bottoming out.

Based on data gathered from Intuit’s online payroll service, companies with less than 20 employees have added jobs since June 2009, said Business Week Additionally, data from SurePayroll shows the average paycheck for workers at businesses with fewer than 100 employees has stabilized, said Business Week.

President Obama has put forth a number of measures intended to get people back to work, including tax incentives for businesses that hire new employees and pushing banks to free up more credit for small businesses.

John Bishop, a labor economist at Cornell University, told Business Week that temporary incentives like tax credits could create more than 2 million jobs in a year.
“It potentially has a huge effect, and small business would be the primary beneficiary of that,” Bishop told Business Week.

Health insurance premiums at Sunshine Sign Co., a small business in Massachusetts that employs about 30 people, will rise 21 percent this year – which translates into about $1,100 per person a year, said an article on Telegram.com. These insurance rate hikes are an affliction facing many small businesses in that state and across the country.

“I guess our question is why are small businesses seeing increases that are twice the rate of medical inflation? We believe the answer is that small businesses are treated as second-class citizens,” Jon B. Hurst, president of the Retailers Association of Massachusetts, said to Telegram.com.

Large companies have more leverage to negotiate lower costs, and rates for smaller groups depend more on factors such as age, community and industry, which can drive up premiums. Insurance plans will often charge small groups a higher base premium, despite providing the same coverage.

Insurers contend that they are raising premiums because doctors, hospitals and other medical providers are charging more. But the Massachusetts Association of Hospitals told the Telegram.com that “insurers can charge small businesses as much as 76 percent more in premiums than they charge their ‘big business’ counterparts,” while adding “billions of dollars to healthcare costs through their billing and claims requirements.”

Massachusetts Gov. Deval Patrick ordered health insurers to file their rates for small groups so the insurance commissioner can review them, said the Telegram.com article. Another piece of legislation would allow small businesses to form groups and purchase insurance together.

The Federal Reserve unexpectedly raised the emergency interest rate — what banks pay to borrow directly from the government — to 0.75% last week.
Reserve Chair Ben Bernanke stressed there are no immediate plans to raise the federal funds rate, the key lending rate that is used as a benchmark for the interest paid on credit cards, home equity loans and many business loans, said CNNMoney.com.

In an effort to spur the economy, the federal funds rate has been near zero since December 2008, but some economists contend that keeping interest rates so low doesn’t help the economy, and in fact, could raise inflation.

Critics say that the low rates contribute to banks not lending to consumers and small businesses. “One of the reasons lending is having such a hard time getting off the ground is that interest rates are so low,” Brian Wesbury, chief economist at First Trust Portfolios, told CNN. “Why would someone lend to a risky small business at 3.5%, especially if you expect rates to go up?”

Bernanke and others believe that raising interest rates could derail recent economic gains, especially in the housing market. Analysts say even a modest rate increase could lift mortgage rates and create another wave of home foreclosures, according to CNN.

Austin is the best city in the country to start a small business, according to a Portfolio.com/bizjournals study.

The Portfolio study analyzed the nation’s 100 largest metro areas, looking for the places that are most conducive to the creation and development of small businesses.

The highest scores in the study went to areas that have prosperous economies, are expanding rapidly, and are densely packed with small businesses. A small business is defined in the survey as any private-sector employer with 99 or fewer employees.

Despite the recession, Austin experienced impressive population, job and small business growth. The number of small businesses in the Texas capital increased 5.6 percent between 2006 and 2007, the latest period covered by official statistics. The typical metro area experienced small-business growth of 1.4 percent, said Portfolio.

The most promising region for entrepreneurs is the South, which is home to 12 of the 20 best metros for small businesses, according to Portfolio.

Rounding out the top five cities are Baton Rouge, La.; last year’s top city, Raleigh, N.C., came in third; Charleston, S.C. was fourth; and Portland, Maine was fifth.

Detroit came in last in the small-business rating, along with Youngstown, Dayton, and Toledo, Ohio, and Milwaukee.

Some version of health-care reform will become a reality after the Senate’s passage of a bill the day before Christmas. So is the Senate bill a gift to small business or a lump of coal in their stockings? New York Times blogger Robb Mandelbaum broke down what the Senate bill would mean for small businesses:

How is small business defined?
A small business that employs one to 100 people will be able to participate in a health insurance exchange. But until 2016, states can limit the small-group market to firms with 50 or fewer employees.

What is a health insurance exchange?
States must set up a so-called Small Business Health Options Program (a “SHOP Exchange”) through which small companies can buy insurance. Plans offered on the exchange would have to be standardized for easy comparison and offer a minimum level of benefits. Starting in 2017, businesses with more that 100 employees can participate in the health exchange.

How will an exchange help small businesses?
Insurers would have to treat small business groups as members of a single risk pool – the bigger the pool, the lower the cost. Beginning in 2014, insurers could not exclude a person based on his health status and could vary premiums only by geography or age. All insurers would have to provide a minimum benefits package defined by law, and there would be limits an employee’s annual deductible, said Mandelbaum.

What about the employer mandate?
The smallest firms will not be forced to buy health insurance for employees. In most cases, companies with more than 50 full-time workers that do not offer insurance would be subject to a penalty of $750 a year for every full-time employee.

Small-business tax credits. From 2010 through 2013, very small businesses would receive a tax credit to offset 35 percent of their health insurance costs, provided the firm contributes at least half of the premium. Then, for the first two years the firm buys insurance through an exchange, the credit increases to 50 percent. The full credit is available to firms with the equivalent of 10 or fewer full-time workers paid, on average, less than $25,000; it phases out as the payroll, excluding seasonal workers, grows to 25 and wages rise to $50,000, said Mandelbaum.

A Health and Human Resources Department report released Thursday says health insurance reform will lower health-care costs for small businesses.

Small businesses are disproportionately burdened by the financial strains caused by rising health care costs. On average, small businesses pay up to 18 percent more than large firms for the same health insurance policy. This difference is due in part to high broker fees, which can be up to 10 percent of premiums, and administrative costs that can be three times those in the large group market, according to a press release from HHS.

Nearly half of workers covered by a small business employer have insurance that limits the total amount the plan will pay for medical care and nearly one in 10 small business workers have a health plan that does not offer prescription drug coverage, said HHS.

Health insurance reform will bring down costs for small businesses by creating a health insurance exchange, providing a tax credit for small businesses that provide health insurance and preventing arbitrary premium hikes. Reform will also ensure Americans have stable, secure insurance coverage, limit out-of-pocket spending and eliminate caps on benefits, according to the report.

The National Federation of Small Businesses is approaching health care reform cautiously and remains opposed to employer mandates and a public option.

Visit www.HealthReform.gov to find out more.

If you’re looking to start a small business, you should consider Oklahoma City as a launch pad, according to a report by CNNMoney.com.

Growing economies, affordable workers, stable housing markets and low crime are the factors entrepreneurs should consider when starting a small business, said the CNN report.

CNN used 2007 U.S. Census data to compare a city’s population and the number of small businesses employing up to 50 people. They determined the top 10 small-business-friendly cities are:

1. Oklahoma City
2. Pittsburgh
3. Raleigh
4. Houston
5. Hartford
6. Washington, D.C.
7. Charlotte
8. Austin
9. New York City
10. Baltimore

Large banking institutions have received the biggest piece of the TARP pie, but small banks are fighting back, pushing the U.S. Treasury Department to send more federal stimulus money their way.

Hundreds of community banks are in danger of insolvency, according to experts, and that is bad news for small business.

“Without some assistance, many stressed community banks aren’t capable of performing their traditional role, and they aren’t going to serve the small business owners who drive much of our economy,” Jeffrey Voss, President of troubled First DuPage Bank in Westmont, Ill., told MarketWatch.com. “Large institutions just aren’t going to help the small business owner.”

Small banks are lobbying for a “matching plan” from the federal government. For example, a small bank could be eligible for $10 million in TARP funds if it could show a commitment of $10 million from private investors, said MarketWatch.com. Those banks would need to show state and federal regulators that they could erase a significant portion of bad loans on their books. The Treasury Department is reportedly considering the plan.

An estimated 500 community banks have received TARP funds – only about 6 percent of the 8,000 small banks in the U.S., said MarketWatch.com.

For Raudel Sanchez and many other immigrant business owners in the United States, the current economic recession has taken a heavy toll and threatens to destroy their hard-won dreams.

Sanchez, 63, came to the U.S. from Mexico in 1967, and he worked up to 14 hours a day, saving money to bring his family to the country, said an article in USA Today.

Eventually Sanchez saved enough to open a small business empire that includes clothing stores, a restaurant and a record label. But with consumer spending and bank loans drying up, he’s stopped advertising, laid off employees and closed two of his businesses.

Immigrant-owned businesses are a cornerstone of the American economy. About 1.5 million immigrants own businesses and account for over 11 percent of all U.S. business income, said Rob Fairlie, an economics professor at the University of California-Santa Cruz, in a study for the Small Business Administration.

Because they have worked so hard and taken so many risks to build their businesses, “immigrants are much more likely to battle it out for longer” during a bad economy, Allert Brown-Gort, associate director of the Institute for Latino Studies at the University of Notre Dame, told USA Today.

Some economists believe that recovery will come slower to small businesses, but many immigrants said they still believe they will succeed.

Sanchez, for one, is sure the economy will rebound. “I still believe in this dream I had many years ago,” he told USA Today. “The only thing is you have to work hard.”