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.

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.

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.

We’ve heard how difficult it is for small businesses to secure bank loans, a new Fed report says that banks have been very willing to issue small business credit cards.

About 75 percent of applicants in 2009 were approved for small business credit cards, according to the report . Even among businesses considered high-risk, 72 percent were approved for a credit card.

In general, credit card loan terms are worse than regular loan terms. The average interest rate on a business credit card in 2009 was about 12 percent and cash advance interest rates 20 percent or more, says the report.

Credit card issuers can also change the terms of the loan or revoke credit card lines altogether. Business credit cards are not subject to the consumer protection afforded by the credit card reform bill passed last year.

While over 80 percent of small businesses use credit cards, only 12 percent borrow (carry over a balance from month to month) on credit cards.

If small business owners worry about borrowing on credit cards, they won’t invest in long-term businesses planning or growth, says CNN.com . And that means they won’t invest in hiring, the linchpin in reviving the economy.

Job seekers choosing to open their own businesses dropped to a record low, according to Challenger, Gray & Christmas, a Chicago outplacement firm.

Just 3.7 percent of high-level job seekers exiting the program were starting new businesses down from 7.6 percent in the first half of 2009 and 9.6 percent in the second half of last year, according to a survey conducted by the company on July 19.

Experts suggest that an improving job market and the difficulty getting small business loans may be steering people away from entrepreneurship, said Business Week.

Federal Reserve Chairman Ben Bernanke said last week that small businesses, and especially startups, are crucial to job growth and economic recovery. Bernanke once again called on banks to loosen credit to small businesses.

Some see the lower startup rate as a sign that the economy is improving. The unemployment rate is still high, but the private sector added 593,000 jobs in the first half of 2010, according the Bureau of Labor Statistics.

Startup activity typically increases as the economy improves, Challenger CEO John Challenger said in a statement.

Small businesses are still facing a tough time to acquire loans for their expansion, said the chairman of Federal Reserve, Ben S. Bernanke. In a Fed hosted conference in Washington, Bernanke disclosed that credit-worthy firms with strong cash flows are refused loans just because their collateral values have declined. Receiving of loans by small businesses is much required to help in speedy recovery of the US economy.

In last two years, bank loans to small businesses fell from $710 billion to $670 billion. Bernanke is imposing pressure on lenders to increase credit so as to boost growth and employment. “Making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges.  Our message is clear: Consistent with maintaining appropriately prudent standards, lenders should do all they can to meet the needs of creditworthy borrowers.” said the Fed chief.

Consumer spending is crippled by “tight credit” The Fed policy makers pledged to help keep interest rates close to zero for an extended period of time. A resolution of the House of representative to pass a $30 billion plan bill to enable community banks find incentives on granting loans to small companies has been opposed by three Republicans.

Confidence Major Issue
The bill “would be very helpful” and a “good boost to the economy,” said Jack Hopkins, director, Independent Community Bankers of America. He thinks it is a confidence issue and so comments “We need to get confidence back into the markets, and that’s difficult when we’re hovering around 10 percent unemployment.”

A difficult situation
The US commercial and industrial loans have reduced from $1.6 trillion at the end of 2008 to $1.24 trillion. Recently many owners had to borrow loans based on credit cards and retirement accounts. “The formation and growth of small businesses depend critically on access to credit. Unfortunately, those businesses report that credit conditions remain very difficult,” commented Bernanke in a conference at Fed headquarters today. Bankers who were present in the conference said that they were willing to extend credit and asked business proprietors to meet their community lenders.

It is critical to find better information about potential borrowers. Banks do not find requisite information and so it is tough to make decisions says Denise Pickett, executive vice president at American Express Co. Also, Kevin Watters, officer in JP Morgan Chase & Co, opines that the problem faced by banks is “healthy borrowers not wanting to borrow.”

The Federal Reserve Chairman, Ben S. Bernanke, expressed his solidarity for the Nation’s small businesses and urged banks and financial regulators to grant them loans for their success. Small businesses are responsible for 60% of job creation and employ almost half of all Americans. But the lending to small businesses show a decline in the last two years. Bernanke expressed his concerns and acknowledged the uncertainty in a daylong forum at the Fed’s headquarters.

Federal data reveals that lending fell below $670 billion in this year’s first quarter, a huge collapse, compared to $710 billion granted in second quarter of 2008. “How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability?” Mr. Bernanke asked. “No doubt all three factors have played a role.”

A fall in the value of collateral and real estates that are used to secure loans is one reason for the decline. Borrowing based on personal credit cards and retirement accounts also posed problems. Even for businesses with strong cash flows but with depreciated value of collateral, obtaining credit for their expansion has become increasingly difficult.

Banks say that meritorious borrowers are granted loans and economists too agree that there is no evidence of refusal to lend. It’s only that banks have resorted to traditional underwriting standards after being too lax. Economists also argue that battered balance sheets and weak economic fundamentals have lowered new lending.

“Credit’s not an issue, Customers are the issue”, said William C. Dunkelberg, economist at Temple University. He reiterated that companies are still cutting on inventory and capital spending is at a 35 year low. But, Kevin P. Watters, chief executive at JP Morgan Chase, said banks are considering borrowers who were initially denied loans.

Citing new research, Bernanke said that in the last 20 years it has been seen that companies less than two old have generated a quarter of gross jobs in America which is certainly a reason to continue lending to small businesses in this recession.

At a Federal Reserve conference in Washington this week, Fed Chairman Ben Bernanke called upon banks to increase their lending to small businesses.

“Making credit accessible to sound small businesses is crucial to our economic recovery,” said Bernanke, a vocal proponent of loosening credit for smaller companies.

While many big firms are flush with cash and are expected to report strong profits during earnings season, smaller businesses have struggled to secure the loans they need to expand and hire. Economists point to this disparity as a reason that the recovery has not been as robust as was hoped.

Small businesses generally spur job creation during recoveries and employ roughly half of all Americans.
Unless these borrowers are able to get loans to expand operations and make new hires, experts fear that the economic rebound will slow in the second half of 2010. Business owners, who identified credit lines and working capital as key financial needs, point to the declining value of real estate and other collateral used securing loans has been part of the challenge in securing funding.

In May, the Obama administration sent Congress a proposal to create a $30 billion stimulus program designed to encourage small and mid-sized banks to loosen credit for the nation’s small businesses. The legislation has not yet passed in the Senate.

The economy will not recover until banks start lending to small businesses, said Federal Reserve Chairman Ben Bernanke.

Bernanke urged banks to loosen lending to smaller companies at a Fed conference Monday, saying that small businesses employ about half of all Americans and account for 60 percent of job creation.

Startups are especially vital, Bernanke said. Over the past 20 years, startup businesses accounted for about a quarter of all job creation.

Meanwhile, big companies are building up their cash reserves and are expected to report strong earnings in the coming week, said the Associated Press.

According to the National Federation of Independent Businesses, roughly one-third of small businesses seeking credit have had trouble getting it. Banks counter that the demand for credit remains weak.

Several big banks, including Bank of America, JPMorgan Chase and Citigroup, have pledged to increase small business lending this year. Total lending to small businesses has continued to decline, however, dropping from around $710 billion in the second quarter 2008 to less than $670 billion in the first quarter of this year, said the AP.

A number of small business owners say they are relying on personal credit cards or dipping into their own savings to stay afloat.