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.

FaceBook, Twitter, LinkedIn and the new Google Buzz may be the biggest but they’re not the only fish in the sea when it comes to social networking sites, especially for small businesses.

Jonathan Blum of TheStreet.com recommends three free social networking applications for small businesses that are more streamlined than the Web behemoths.

XMarks: Download the application, open a free account, and you can store and share bookmarks about a client or job as a Web page, RSS feed or e-mail that will be available on any computer, allowing you to more easily share information with colleagues.

Jing: A Web collaboration tool specifically for videos and stills. Lets you store video, images or animations on the Jing server, which creates a Web link that can be sent via e-mail, chat or Web page. The bandwidth is not as strong as video sharing tools like Skype but it is simpler to use, says Blum.

Notepub: An alternative to Google documents, Notepub is a document collaboration tool that allows users to create and share simple notes on any computer. While you won’t have access to features like RSS or chat software, Blum says Notepub is a quick, easy way to share documents, images and files.

Small businesses are the “places where most new jobs begin,” President Obama said in his weekly radio address Saturday, a day after announcing new measures to create jobs.

Obama has proposed tax incentives and credits, expanded government loan programs and aid to community banks that he said will help small businesses hire new employees, reported Bloomberg News.

The president’s plan would eliminate capital gains taxes on small businesses in 2010 and give small businesses a $5,000 tax credit for every new job created. In addition, $30 billion from repaid bank bailout money would be distributed to community banks to spur small business lending, said the Associated Press.

The plan would also temporarily increase the cap on Small Business Administration loans from $350,000 to $1 million and expand the SBA program to help refinance commercial real-estate loans, said the AP. All of the proposals would need to be approved by Congress.

The unemployment rate has finally dipped just below 10 percent, but with the public deeply frustrated by sluggish job growth, the administration is refocusing its efforts on job creation.
“Government can’t create these businesses, but it can give entrepreneurs the support they need to open their doors, expand, or hire more workers,” Obama said in the radio address.

President Obama announced a plan last week to provide $2.3 billion in tax credits to “green” businesses with the goal of creating more than 17,000 jobs nationwide.

The tax credits will be given to businesses that build clean energy products to help them defray up to 30 percent of the cost of new investments in manufacturing facilities, said the San Francisco Chronicle.

Obama said the clean energy sector will create “jobs that pay well and can’t be outsourced.”

The tax credits are funded by the $787 billion stimulus package and matched by $5 billion in additional private funding.

Hundreds of companies filed applications for the credits and winners were selected after reviews by the Energy Department and the Internal Revenue Service, said the San Francisco Chronicle.

In November, the U.S. Department of Energy distributed 125 grants of up to $150,000 each to 107 small clean energy technology firms, said
theGovMonitor.com.

Small businesses that show successful results will be eligible for $60 million in a second round of grants this summer.

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.

At President Obama’s meeting with bank CEOs last week, he encouraged them to take a “third and fourth” look at small businesses that had previously been rejected for loans.

US Bancorp CEO Richard Davis said that his bank would be willing to take a second look at every loan it rejects and, as chairman of the Financial Services Roundtable, said he would present the idea to executives at other large banks.

But as John Tozzi points out on BusinessWeek.com , US Bancorp has been taking an automatic “second look” at rejected loans for quite some time.

US Bancorp spokesman Steve Dale told Tozzi that the bank looks for a way to adjust the loan conditions, but now, he said, “We’re going to try harder to say yes and we’re going to look for more ways to say yes.”

US Bancorp gets about 40,000 applications for small business loans each month, and Dale told Business Week the bank’s approval rate is between 40 and 50 percent.

Bank of America, Wells Fargo and American Express also said they have had second-look programs in place for a year or longer, according to the Wall Street Journal.

The banks told the Journal they’ve recently taken steps to ramp up the second-look process, including hiring new staff, widening application criteria and formalizing appeals programs. Bank of America pledged to increase small-business lending by $5 billion next year.

Small businesses are traditionally the first to start hiring during an economic recovery, but that doesn’t seem to be the case this time around. Many small business owners say the credit crunch is a major reason they won’t be hiring anytime soon.

With little funding available, small businesses will rely more on temporary hires and independent contractors, says Business Week.

And in companies of all sizes, existing workers will just be expected to do more.

Daniel W. Glier, president of Glier’s Meats in Kentucky, an 18-person, $3 million sausage maker, told Business Week he’s keeping headcount down by restoring some workers’ hours that got cut earlier this year. He’s also using temps so that if he has to let them go, his unemployment insurance premiums won’t rise. “I’m not going to stick my neck out right now and hire people,” he told the magazine.

The good news, however, is that the number of layoffs at small and mid-size businesses are shrinking. Companies with less than 50 workers shed 75,000 jobs in October, down from 288,000 in March, said Business Week.