Cut the piece of wood down to size - you'll need two 12 inch long pieces of 1x2 and two 18 inch long pieces of 1x2 for this one.
Then, start laying out the pieces to create the loom shape. I recommend putting the 2 longer pieces (18 inch pieces) on the bottom and the 2 shorter pieces (12 inch) on top of that. This will give you a little more space for hands, etc when weaving later.
Next, begin screwing the pieces together. You may want to create a pilot hole first to avoid splitting the wood. Just like in the larger loom, two screws diagonal from each other seemed to work really well for securing each of the 4 corners.
You can also use finishing nails instead of screws for this if you prefer, but I would recommend also using some type of wood glue in between the two pieces of wood if you go that route.
Now it's time to measure for the nails. Make sure the loom is facing right side up (with shorter horizontal wood base pieces on top of the longer ones). Make a mark every 1/3 inch, all the way across the top horizontal piece of wood and the bottom horizontal piece of wood.
Then, hammer a nail in at every mark, in a straight line across. You'll do that on the top and bottom of the loom and then it's ready to be strung up for use.
To create your warp, tie a knot around the first nail in the upper corner with your yarn / string. Then, keeping tension in the string, bring the string down to the first nail at the bottom of the loom, wrap around that nail, and continue back to the top of the loom (this time wrapping around the second nail).
Then go back down to the bottom second nail, etc. Repeat this process until the entire loom is strung and then knot the very last nail on the bottom right to finish it. Cut off excess string from end of knot and it's ready for weaving.