Over the past few years, credit card companies and small business owners have become more dependent on each other to conduct business. About 12 percent of 6 billion mailed credit card offers target small businesses, while their owners account nearly as much of all Visa and MasterCard charges, according to industry studies.

But with the development of the economic downturn, both are now struggling to stay afloat. And as small business owners continue to rely heavily on credit cards, credit card companies risk losing billions in revenue.

“This is the riskiest loan a bank can make,” said Ken Clayton, American Bankers Association senior vice president for card policy, to Business Week. “They have to charge money to get a return on that risk. If this were a traditional loan that had collateral that backs it, it would be a lot easier to lock in rates.”

To make up for such losses, credit card companies have subjected small business owners, among others, to higher interest rates and more annual fees – changing terms that make conducting business “like trying to build a house with blocks that keep changing shape,” said National Small Business Association chair Marilyn Landis.

But then came preliminary drafts of the Credit Card Accountability Responsibility and Disclosure Act. With promises to bar over-limit fees and end double-cycle billing, among other new protections, it soon gained support from both the National Small Business Association and the National Federation of Independent Business.

However, what President Obama ended up signing into legislation on May 22 only protects personal credit card users. Out of the 74 percent of small business owners who hold credit cards, 39 percent of them applied based on personal credit, said Chris Walters, National Federation of Independent Business manager of legislative affairs.

But while those particular business owners are protected, those who applied based on business credit are not. Those with accounts under Discover Financial Services are also not covered under the legislation, since both personal and business credit are considered.

Attempts to pass protections by both House and Senate members have so far failed. One, by Sens. Mary Landrieu, D-La., and Olympia Snowe, R-Maine, proposed to extend protections to businesses with 50 or fewer employees.

These heads of the Senate Committee on Small Business and Entrepreneurship have vowed to look into “other legislative vehicles.” In the meantime, Congress also voted to conduct a survey on small business credit card use over the next 12 months. With that, the National Retail Federation has advised the government to study interchange fees — what Visa and Mastercard banks charge business owners per credit card transaction.

Readers, what do you want Congress to know about your credit card use? What are your thoughts on the legislation? Let us know in the comments.

Small businesses increased their staff levels by 0.26 percent last month and 3.3 percent for the year so far, according to payroll administrator SurePayroll.

“We are big believers in small business resiliency but even we were a little surprised to see that U.S. small businesses managed to hire new employees in November,” said Michael Alter, SurePayroll president, in a statement.

SurePayroll polled more than 20,000 small businesses, finding that they hired more while also paying less for salaries. The average paycheck fell nationwide by 0.39 percent, and has fallen by 2.6 percent so far this year.

“We had anticipated a slowdown in salary declines, but higher employment clearly is allowing employers to hire talent for less money,” Alter said.

When SurePayroll asked a smaller sample how the economic downturn affected them, about 43 percent of them said that business has not been affected negatively. In addition, 4 percent of them even said they were doing better.

More than half of those businesses said they now feel optimistic about the economy, though other businesses surveyed in different studies revealed a growing pessimism.

In a Discover Financial Services survey conducted last month, about 65 percent of small businesses rated the economy as ‘poor.’ A third of the polled business-to-business owners also said they had cash flow issues in the preceding 90 days.

In addition, the National Federation of Independent Business found that positive outlooks from small business owners in August and September led to “recession level” feelings in October.

“October … would seem to be the proverbial ‘nail.’ Case closed. Tough times ahead,” the economic report stated.

Meanwhile, Alter had also considered news of a developing recession that month.

“It would be truly remarkable if small businesses could still manage to grow on average,” Alter said in SurePayroll’s October report. However, he had also likened small businesses to Rocky Balboa: “beat them to a pulp and they will keeping fighting.”

Randal Pinkett is best known for surviving Donald Trump’s scathing boardroom criticism on season four of NBC’s "The Apprentice" and impressing the billionaire real-estate mogul enough to hire him. But before that, Pinkett was known around his college campus at Rutgers as a student entrepreneur who juggled business classes with running a thriving CD business out of his dorm.

Now as CEO of BCT Partners, a Newark, N.J.-based consulting firm, the "Apprentice" winner hopes to use his experience to help other aspiring young entrepreneurs start and grow their own companies. We talked with Pinkett about his new book, Campus CEO: The Student Entrepreneur’s Guide to Launching a Multi-Million Dollar Business (Kaplan Publishing, 2007), as well as his views on the rising trend of student entrepreneurship and his secrets to business success.

Q: What did running a business teach you that you couldn’t learn in school, and how did your entrepreneurial experiences give you a competitive edge on "The Apprentice"?

A: Running a business taught me a lot of things that I couldn’t learn in the classroom, like how to generate profit, mark up products, do taxes, respond to customers and put the right systems in place to do my accounting, recordkeeping and inventory. I learned a lot of the fundamentals of business by doing them. It was great preparation for being on the show because we were required to wear different hats in different circumstances on different days. I went from being a student leader, an athlete and a business owner to a product manager, a producer of a commercial and a designer of a parade float. Having the ability to adapt and get up to speed quickly helped me.

Q: What’s the biggest challenge campus CEOs face?

A. Establishing credibility. While there are many benefits to being a student entrepreneur, at the end of the day you’re still young, and you’re still a student. You have to establish the kind of credibility that will ensure that adults on the other side of the table take you seriously. That means coming prepared with your t’s crossed and your i’s dotted. It means having a solid business plan and competitive analysis and market research, so the minute you sit down at the table your language is reflective of someone who understands the business and demonstrates seriousness. You may have to work harder to overcome the predisposition of those who might say, "You don’t know what you’re talking about."

Q: What’s behind the rising trend of teens and college students who are starting business while still in school, and what’s unique about today’s young entrepreneurs?

A: We’re the sons and daughters of a generation that experienced corporate downsizing and layoffs. We watched our society shift from one where you could expect to work for a company your entire life to one where you couldn’t. It changed the dynamic for my generation, causing us to think more independently and not put the fate of our careers in the hands of one employer. Today’s young people have a natural mastery of technology and, as a result, are innovating and pursuing business opportunities because of that. The rising cost of getting an education was a contributing factor for me starting a business. My business wasn’t a multimillion-dollar enterprise, but to be able to pay for books and still go out on a date occasionally, I had to be able to offset the costs. That’s a situation that’s very real for a lot of students. What’s unique about today’s student entrepreneurs is that they’re indeed running and growing successful enterprises. It’s common to see first generation, student-run businesses delivering food and laundry services to dormitories or selling used books. YouTube, Google and Yahoo are all serious businesses that were started by college students and have grown into public companies and multibillion-dollar enterprises. This generation is really pushing the envelope and challenging long-standing preexisting companies to say, "Hey, you’ve got to take us seriously."

Q: What are some misconceptions students have about what it takes to start a business?

A: Many succumb to the myth that they’re too young or inexperienced, or they need a lot of money to start their own company. When it comes to money, one out of every 10 high-growth business starts with $1,000 dollars or less. As for lack of experience, owning a business challenges you to assume a wide range of responsibility – more so than an internship or a part-time job might. It was young people who were able to see that there was no Facebook and create it; it was young people who saw the need for the first Kinko’s and the first national pizza chain. Being young is an asset because you’re able to see opportunities that interest other young people – opportunities that might be difficult for someone who is older and more experienced to see.

Q: How can teachers best encourage and guide students who dream of starting businesses?

A: Aspiring entrepreneurs naturally approach their business ideas with enthusiasm, energy and sense of limitless possibilities. While those are great characteristics, those ideas must be tempered at times with a reality check. Students need to know that they have to do their homework, and that it takes rigor and time to validate a good idea. Teachers have the opportunity to ask the right questions, prompt the right thinking and challenge students to show them that something they believe in can really work.

Q: In the book, you talk about balancing a business with getting an education. What’s the key to this?

A: You need to become a student of being a student. Part of being a successful student entrepreneur is learning about how you can best learn and going out and getting materials on things like how to study, take tests, manage stress and balance multiple demands on your schedule. It’s different for everyone in terms of what works best.

Q: What’s the secret to launching a successful business?

A: It begins with having a solid business plan that forces you to answer critical questions about your market, your customers and your business model. Secondly, it’s about building a great team. Many, if not most, of business success stories are not just about the entrepreneur; it always takes the team to grow a successful enterprise. At any company, the most valuable asset is the people – that’s certainly the foundation of my company. It boils down to getting the right plan and the right people in place, so you can leverage that energy with different talents and bring people to the table so that it’s not just you alone fighting the good fight.

Q: What advice would you give to aspiring young entrepreneurs who are contemplating starting a business?

A: Either put the wheels in motion and get a plan developed or look for ways to use your idea in a class project or an independent study. If you write a business plan as part of a class, you have no choice but to do it (or flunk), and you walk away at the end of the semester with a tangible project. If you can’t wait to pursue your idea, find someone – a professor, a relative or a graduate who works in the industry – who you can bounce ideas off of and who will give you feedback. There comes a point in time when you just have to decide you’re going to do it. Part of being in business is that you can learn a lot through failure. You can’t be afraid of failure. All great entrepreneurs have experienced moments when things didn’t work out as they expected, but they were willing to give it another shot and try again.

Article used with permission from the National Federation of Independent Business. NFIB is the leading advocacy organization representing small and independent businesses. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals. Visit www.NFIB.com to learn more.

Precautions

Loving what you do isn’t enough
What are your reasons for wanting to turn your hobby into a business? If your only reason is really enjoying your hobby, this simply won’t cut it. While having passion for what you do can be a factor in running a successful business, there are so many other considerations in starting up and running one. Also consider that even if you love what you do, running a business will still be work, and you may find yourself loving what you do less and less when you’re required to do it instead of wanting to.

Make sure the logistics work
Let’s say you edit and offer suggestions on your friends’ term papers and are thinking of offering your services campus-wide for a fee. How long does it take you to read and critique a single paper? How much time could you devote to this enterprise without affecting your own studies? If you took on more essays, would you still be able to offer the time and care you’re currently taking, which is what makes your service valuable? Could you charge enough to make it worth your time? Figure out all the pertinent logistics before leaping ahead.

Scope out the competition
Sure, your friends might love the mittens you knit them at Christmas, but that doesn’t necessarily mean they’ll be willing to pay for them. Take a trip to the businesses in your area that offer the same services. Compare their pricing with what you’re planning to charge and compare quality, too. Can you offer something the competition lacks? If not, it might be hard to draw existing customers away.

Proceeding

Don’t skip any steps
Even if you’ve been at your hobby for years, going into business with it is still an entirely new venture. You’ll need a business plan, including cost and earnings projections, space and supplies needed, and so on.

Enlist friends and family to help with the transition
Making the people close to you part of the business launch perhaps will alleviate some of the tension you might feel over asking them to start paying for the services you’ve always given them for free. Ask them for testimonials and other marketing help. You can offer them a discount for their help, which could further dissipate any awkwardness.

Manage your time like a professional, not a hobbyist
When this was your hobby, all you had to think about was making the product and perhaps filling a few orders. Now you need to think like an entrepreneur, budgeting time for all aspects of your business, such as research and development, marketing and more.
Turning your hobby into a business can be a great thing. You likely have a built-in customer base who knows you’re passionate about your offering and will happily help you spread the word. Just take the necessary steps to ensure that your passion can sustain all the headaches (albeit often rewarding ones) that come with owning your own business.

Article used with permission from the National Federation of Independent Business. NFIB is the leading advocacy organization representing small and independent businesses. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals. Visit www.NFIB.com to learn more.