Small business owners should think twice before skimping on holiday gifts to clients, the AP's Joyce Rosenberg writes.

Sen. Mary Landrieu (D-La.) says Congress must get health reform right for small businesses, David Herszenhorn reports at the NYTimes Prescriptions blog.

And Time's Janet Morrisey finds small business left out of the recovery.

Sen. Carl Levin (D-Mich.) floats another small business loan program.

Despite the focus on access to credit, weak demand is the biggest problem small business owners report, Anita Campbell writes at Small Business Trends.

Small firms in New York state drop health care en masse, Barbara Benson writes in Crain's New York.

Health insurance plans designed for freelancers may not fit into the insurance exchanges reformers propose, David Whelan reports at Forbes.

Still mired in the recession are small firms and the millions of unemployed and underemployed. Incomplete or lagging data, he suggests, distorts the perception of how well the economy is doing:

And, while data from firms suggest that job losses in the past three months were about 600,000, household surveys, which include self-employed workers and small entrepreneurs, suggest a number above two million.

He also echoes Fed Chairman Ben Bernanke's analysis that credit is restored for corporations with access to capital markets but not for others:

And the credit crunch for non-investment-grade firms and smaller firms, which rely mostly on access to bank loans rather than capital markets, is still severe.

Or consider bankruptcies and defaults by households and firms. Larger firms – even those with large debt problems – can refinance their excessive liabilities in or out of court, but an unprecedented number of small businesses are going bankrupt. The same holds for households, with millions of weaker and poorer borrowers defaulting on mortgages, credit cards, auto loans, student loans and other consumer credit.

Consider also what is happening to private consumption and retail sales. Recent monthly figures suggest a rise in retail sales. But, because the official statistics capture mostly sales by larger retailers and exclude the fall by hundreds of thousands of smaller stores and businesses that have failed, consumption looks better than it really is.

While we likely have to wait for more data, there seems to be an emerging theme that the economy most small firms inhabit is diverging from the economy that firms with access to stock and bond markets inhabit. Roubini's essay expands on an idea advanced last week by Goldman Sachs economist Jan Hatzius that found small business sentiment (as measured by the NFIB's index) out of line with other measures of the economy, like GDP.

In our post about Hatzius's report, we asked readers who have weathered other recessions whether this recovery feels different. One, Jeff Goldberg, left this comment:

My experience is we had credit available in the early 1990's. This time it has all but dried up. With no credit it is difficult to wiggle. We therefore have laid off 2 people and are hoping for some type of holiday season to pull us through.

Read Roubini's full piece here. And let us know where it feels like your business operates -- in the economy that's recovering, or the one that isn't.

Small business lending from bailed out banks is down 4% or $10 billion in six months, reports Catherine Clifford at CNNMoney.

The White House hosts a roundtable on small business financing with Treasury Dept. and Small Business Administration set for tomorrow. Treasury Secretary Timothy Geithner and SBA Administrator Karen Mills are scheduled to be there. Deborah Soloman of the WSJ has more.

More and more businesses are built on lead generation, Steve King writes at Small Business Labs, from Google to social games.

Four key elements to boosting local search rank, via Lisa Barone at Small Business Trends.

Goldman will invest $300 million in community development financial institutions, lenders that focus on economic development in low-income neighborhoods. The program will also provide $200 million in scholarships for business owners to get training at community colleges and other institutions. Loans and classes funded through the program are set to begin early next year.

The initiative, dubbed 10,000 Small Businesses, seeks to drive smalll business job growth by combining business education, mentoring and networking, and access to capital. Goldman is partnering with respected small business organizations, including the Initiative for a Competitive Inner City, which focuses on small business development in underserved areas.

Buffett (who is Goldman's largest investor) will sit on the program's advisory council along with Goldman CEO Lloyd Blankfein, ICIC founder and Harvard professor Dr. Michael Porter, and a dozen other leaders from the business and educational communities.

The plan may be as much about softening Goldman's image as helping small business. The firm faces sharp criticism and public anger over doling out bonuses just a year after taking $10 billion in bailout money, which it has since repaid. (Goldman still enjoys other government guarantees and benefited from the bailout of AIG.)

While much of the economy struggled through 2009, Goldman recorded three booming quarters after taking a loss at the end of last year. The firm reported net income of $3.2 billion in the most recent quarter, and has set aside $16.7 billion for compensation.

The Fed chairman's wide-ranging talk described an economy that had averted disaster but still faced two big challenges: tight credit for small and mid-size firms and households, and high unemployment.

Here are some excerpts of Bernanke on small business:

In particular, borrowers with access to public equity and bond markets, including most large firms, now generally are able to obtain credit without great difficulty. Other borrowers, such as state and local governments, have experienced improvement in their credit access as well.

However, access to credit remains strained for borrowers who are particularly dependent on banks, such as households and small businesses. Bank lending has contracted sharply this year, and the Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices shows that banks continue to tighten the terms on which they extend credit for most kinds of loans--although recently the pace of tightening has slowed somewhat. ... For their part, many small businesses have seen their bank credit lines reduced or eliminated, or they have been able to obtain credit only on significantly more restrictive terms. The fraction of small businesses reporting difficulty in obtaining credit is near a record high, and many of these businesses expect credit conditions to tighten further.

That constriction of bank lending could translate to weak job growth in the recovery, Bernanke said.

In addition, difficulties in obtaining credit could hinder the expansion of small and medium-sized businesses and prevent the formation of new businesses. Because smaller businesses account for a significant portion of net employment gains during recoveries, limited credit could hinder job growth.

[...]

Banks' reluctance to lend will limit the ability of some businesses to expand and hire. I expect this situation to normalize gradually, as improving economic conditions strengthen bank balance sheets and reduce uncertainty; the fallout for banks from commercial real estate could slow that progress, however. Jobs are likely to remain scarce for some time, keeping households cautious about spending. As the recovery becomes established, however, payrolls should begin to grow again, at a pace that increases over time. Nevertheless, as net gains of roughly 100,000 jobs per month are needed just to absorb new entrants to the labor force, the unemployment rate likely will decline only slowly if economic growth remains moderate, as I expect.

In terms of access to credit, small businesses and big businesses are again facing two different recoveries. (Hat tip to WSJ's Real Time Economics blog.)

The credit crunch still holds businesses back in South Florida, Jim Wyss reports for McClatchy.

Younger businesses may be the key to job creation, according to a recent Kauffman study. Rieva Lesonsky explains in Small Business Trends.

Tim Berry looks at five essential things entrepreneurs should learn in b-school, but don't.

Small employers in Massachusetts get hammered by health premium hikes, led by market leader Blue Cross, Robert Weisman reports in the Boston Globe.

Those are the questions Jan Hatzius, chief US economist at Goldman Sachs (GS), tackled in a Nov. 11 commentary (no link available). Hatzius says the recent 3.5% GDP growth estimate (annualized) for the third quarter could overstate how much the economy expanded by as much as .5 to 2 percentage points. He gets there essentially by looking at how GDP growth historically tracks to the NFIB's Small Business Optimism Index.

From Hatzius's note:

The National Federation of Independent Business (NFIB) reported on Tuesday that small business optimism edged up very modestly to 89.1 in October. While this is the highest level in a year, the index remains more than two standard deviations below its long-term average. The weakness of the NFIB [index] stands in stark contrast to other indicators such as the purchasing managers indexes published by the Institute for Supply Management, which have moved back to around their long-term averages, and real GDP, which grew an estimated 3.5% (annualized) in the third quarter. Small firms appear to be underperforming their larger peers, most likely because of differential access to credit.

I put together the rough chart below based on quarterly data from the NFIB's Optimism Index. Each line charts the group's measure of small business optimism (based on member surveys), starting in the first quarter of a recession and going through the end of that business cycle (i.e., when the next recession begins). I've used the NBER's business cycle dates, and I combined the double-dip recessions of the early 1980s. Click here for full image.

The red line tracks the index from Q4 of 2007, when the current downturn officially began. Though it's ticking up, the NFIB's optimism measure is way below where it has been at this point in any other business cycle since the index began in 1974. Despite the rally in the stock market and other hopeful signs, this measure of the small business sector doesn't show an incipient recovery. With small firms employing half of all private sector workers, their gloomy outlook contributes to the high unemployment rate. (In the last three months, 19% of small employers reduced headcount, compared to 8% that increased, according to the NFIB's November survey.)

If small companies are suffering more than large ones, there could be a discrepancy if data collection for small firms, especially proprietors, lags. Here's Hatzius's takeaway:

Our conclusion is that if small firms aren’t captured well in the advance GDP data, the economy may be growing less quickly than suggested by the recent official data. This would not only reconcile the GDP data with the NFIB survey, but would also go some way toward explaining why the unemployment rate has so far continued to increase at a considerable clip despite official GDP estimates that imply above-trend growth. If there is an error, it may eventually be corrected via revisions, although the process could take several years.

If this analysis is accurate, it clarifies the disconnect between big business and small business. That difference was less evident earlier in the downturn. Things looked pretty dismal for businesses of all sizes a year ago. At this stage, big businesses and small busineses appear to be facing different recoveries -- or lack of thereof.

Many of our readers have steered their companies through at least one downturn before. If you have, let us know -- is this one different? Are you less optimistic about growth? Why? Tell us in comments below, or on Twitter.

More analysis on this from Seeking Alpha, the Curious Capitalist, and the The Pragmatic Capitalist.

Survivor bias distorts business advice and research, writes Jason Cohen at Building 43 (hat tips to Tim Berry and Steve King.)

Small business' woes may not be reflected fully in official statistics like GDP, writes Justin Fox at Time's Curious Capitalist blog, suggesting reports of imminent recovery may be exaggerated.

Credit unions in Canada are winning over small business customers from big banks, according to Monica Gutschi in DJ Newswires.

Another attempt to extend credit card protections to small business cards stalls, and the NY Times' Robb Mandelbaum looks at why.

And some of those numbers about small business job creation look deceptively optimistic. Scott Shane breaks it down in BW.

Got brighter news? Let us know on Twitter.

On Nov. 21, retailers will promote local shopping with America Unchained! (and Canada Unchained!) events organized by local business alliances. The American Independent Business Alliance has a tool kit here.

By now consumers and business owners broadly recognize the buy-local movement and it seems to gain attention each year, particularly with the recent focus on local food. It's no coincidence that the America Unchained! promotion comes the week before Black Friday. Small retailers want to get customers' attention before the post-Thanksgiving sprint begins.

Yesterday I asked Becky McCray, author of the Small Biz Survival blog on rural and small town businesses, what local stores can do to boost sales during the holidays. McCray, who also owns a liquor retailer in Alva, Okla., offered several ideas that we'll unspool in our ongoing coverage of the holiday retail season, but here's one to think about now: focus on Thanksgiving instead of Christmas.

Outside of supermarkets, most chain stores don't promote around Thanksgiving. They've long since started Christmas-related marketing, which begins earlier each year. Thanksgiving is not a gift-giving holiday. My sense is that it's one of the few American holidays that still feels authentically about what it has always been about, and heavy-handed marketing around it would seem cheap.

So how can small retailers tie promotions to Thanksgiving? By marketing with authenticity, McCray says. "It’s a great time to emphasize family, to emphasize togetherness," she says. This is a natural for food and wine stores, but it's less about what the store sells than putting the products in the context of how people can use them "to provide a warm and welcoming atmosphere in their home right now," McCray says. Even a hardware store can highlight this as a time to make small repairs to ready the house for guests. "Every retailer has some connection to people's lives," she says. "That’s why we exist."

If you spot a creative local holiday campaign or Thanksgiving promotion, let us know in comments below or on Twitter.

The "informal economy" -- that's off-the-books business but not outright criminal industries -- could be $1 trillion or 8% of GDP, Taylor Barnes reports in the Christian Science Monitor.

Entrepreneurs want their VC board members to be other entrepreneurs, not just bankers, Scott Austin finds at the WSJ's VC Dispatch.

Simple is harder than complicated, but businesses like Chipotle and Nintendo are build on doing fewer things than the competition, writes Matt Linderman at Signal vs. Noise.

Strategies for targeting frugal shoppers this season from Janet Meiners Thaeler at Small Business Trends.

Learn how to bootstrap your marketing from novelist J.C. Hutchins in Becky McCray's post at Small Biz Survival.

And retirees are launching startups for second or third careers, BW's Lauren Young reports in this week's magazine.

Did I miss something? Let us know on Twitter.

Award-winning filmmaker Mazzio, who has written and directed several other documentaries focused on entrepreneurship, including Lemonade Stories and We Are BlackRock, got the idea for Ten9Eight after a conversation with NFTE's founder, Steve Mariotti, at a 2004 screening. After landing funding to make the documentary last year, the former Olympic rower and commercial real estate lawyer set to work chronicling the aspiring entrepreneurs with the goal of convincing their peers to stay in school.

Mazzio says she was most surprised by the velocity at which her subjects' communication skills improved as they made their way through the NFTE contest--and the sheer number of promising kids she met.

"For all the Rodneys and the Annés and the Jamals and the Jessicas that are actually in the film, there are hundreds of thousands of kids that are just like them in low-income communities. Most of America doesn't really realize that," she says.

While acknowledging business curriculum is not allowed in traditional high school settings, she hopes policymakers and educators will consider offering it after watching her documentary. "What this film is, is one tool in the anti-dropout toolkit. It's not a cure-all. It can't solve the crisis."

The film opens this Friday, Nov. 13 in AMC movie theaters in New York, Los Angeles, Washington DC, Boston, Chicago, Atlanta, Miami, and Kansas City. Free screenings are available for teachers and their students this Thursday, Nov. 12. You can watch the trailer now and catch Secretary of Education Arne Duncan's introduction to it below.

As part of our ongoing look at how a handful of retailers are faring this holiday season, I asked the business owners we're following how they prepared their inventory for this holiday season.

Einmaleins, the European lifestyle and home products shop in Olympia, Wash., ran out of certain products late in the season last year. "We probably would have done at least 20% more if we had product in," the store's owner, Mathias Eichler, told me. He wants to avoid that this season -- but that means stretching finances to stock up before sales pick up. The business, just over two years old, is still trying to establish credit lines with suppliers and lenders that would allow it to comfortably expand inventory. Eichler writes:

As a still reasonably new store, I am trying to work with my suppliers to extend terms -- not always successfully. We've placed some of our orders very bullishly in early April/May (imports from Europe) and [were] expecting a 40% increase over last year. Since then I don't know if I still can manage that, but the product is in, mostly paid for and we're hoping for the best. I am in talks with a bank (it's late already) to get a line of credit to place my last holiday orders.

In the course of the last year, we've established our lines we carry better and are expecting an increase almost across the board. ... So, since we were cautious last year and sold out of many of our items we're trying not to make the same mistake. Since November started we've seen a bit of an uptick in sales compared to last year, which is great to see. People are already spending money. Small stuff, stocking stuffers etc. [Under] $10 items.

I'm hopeful, but money is very tight right now with many outstanding bills that will have to wait until December to be paid.

David Sasson of Overstock Art has a particular challenge. He carries 1,500 different paintings, and for best sellers he might stock 100 copies. His hand-painted replica artwork needs to be ordered from China six to 10 weeks in advance. That means that if he runs out of a painting between now and the end of December, he probably won't be able to get more until after the holidays. Here's Sasson's take on managing inventory:

We started increasing our order amounts in August. We are expecting this holiday season to be much stronger then last year and therefore, are ordering quite a bit more inventory. Our focus this year has been to fine tune our inventory process which means we are ordering in smaller batches. However, during this time a year there are paintings we do not want to be out of.

When it comes to ordering frames our lead time is similar to a standard retailer. Our lead times are between two days to two weeks depending on the vendor and shipping time. We are using a simple formula to predict demand in which we stock a two months' supply from the slower vendors and two weeks' supply from the closer vendors. During this time, and since we've seen a spike in demand in the last three months, we've been ordering three to four months' supply on some frames. Also, we are having problems with some frame suppliers who do not have enough inventory, so we might run out of our best selling frames.

Inventory is going to be particularly challenging this holiday season, because it's hard for the entire supply chain to predict what the ultimate consumer demand will be. Last year, since the truly scary period of the financial crisis didn't begin until September, a lot of suppliers and retailers had excess inventory by the time people started cutting back their spending. That resulted in deep discounts.

Now we're more than a year into a period of slackened consumer demand. Businesses cut production to adjust. If consumers decide to spend more than businesses anticipated, stores could find themselves selling out earlier than expected. As Sasson points out, this is already beginning to happen with some of his frame suppliers.

So an open question to retailers: How is your store managing inventory differently this year compared to last year? Let us know in comments below or on Twitter.

The last report in August seemed to show the credit crunch decelerating. Stabilizing might be a better word -- credit conditions are not really easing but they're not tightening at the rate they had been. Some details from the Fed below:

In the October survey, domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households. However, the net percentages of banks that tightened standards and terms for most loan categories continued to decline from the peaks reached late last year. ... A small net fraction of branches and agencies of foreign banks eased standards on [Commercial & Industrial] loans, whereas a significant net fraction continued to tighten standards on [Commercial Real Estate] loans. Demand for most major categories of loans at domestic banks reportedly continued to weaken, on balance, over the past three months. This weakening was somewhat less widespread than in the July survey for C&I loans, CRE loans, and nontraditional mortgages; approximately the same for consumer loans; and significantly more widespread for home equity lines of credit. ... Demand for C&I and CRE loans at foreign banks continued to weaken, on balance, but the weakening was somewhat less widespread than that in the July survey.