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Half Of Business Owners Still Rank U.S. Economy As Excellent Or Good

March 26, 2007
Riverwoods, Illinois, March 26, 2007 – In spite of mixed messages from other segments of the economy, economic confidence among small business owners increased in March, driven in part by improved cash flow and rising confidence among consumer-focused merchants, according to surveys conducted for this month's Discover® Small Business WatchSM. At 117.7, the Watch rose slightly more than four points over February's mark of 113.4.

“With uncertainty in so many sectors, it isn't surprising that the percentage of small business owners who feel the overall economy is getting worse did increase this month,” said Sastry Rachakonda, director of Discover's small business credit card. “However, there was also an increase in the number of owners who believe economic conditions will get better for their individual businesses in the next six months. The cash flow situation among businesses has improved over last month. We have to be on the lookout to see if the recent sub-prime woes will eventually affect small business owners in terms of cash flow and their access to capital.”

March Key Findings:

•51 percent of the small business owners thought the economy was getting worse up from 47 percent in February.

•Cash flow has improved since last month. In March, 33 percent of small business owners indicated that they had experienced temporary cash flow issues, down from 39 percent in February.

•49 percent of small business owners indicated that economic conditions for their businesses were getting better, up from 44 percent in February.

Spotlight Poll: Tax Prep Takes Toll on Small Business Owners

“Nearly three out of four small business owners feel that the complexity of tax code is a distraction. Nearly two out of five business owners struggle with finding and organizing tax documentation.” Rachakonda said. “Tax preparation and filing certainly places a burden on small business owners in America.”

Burden of Tax Preparation

• 77 percent of small business owners say tax preparation and documentation is either very time consuming or somewhat time consuming.

•74 percent say the complexity of the tax code distracts them from focusing on the needs of their businesses.

•39 percent find it very difficult or somewhat difficult to find and organize tax documentation.

Assistance from Accountants

• 73 percent of business owners will hire an accountant to do their taxes, compared to 54 percent of people who don't own businesses who plan to hire an accountant.

•More small business owners, 56 percent, feel that accountants deserve the fees they charge, compared to 41 percent of people who don't own businesses.

• The biggest advantage of hiring tax professionals – according to both small business owners and consumers – is having them handle paperwork. Finding more deductions finished a close second.

•40 percent of small business owners and 30 percent of consumers expect to pay lower taxes if they hire a professional.

“In spite of increasing tax software usage, both business owners and non-business owners find that accountants still add value in the tax preparation process,” Rachakonda said.

About the Small Business Watch:

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who employ less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 1,000 small business owners. It is commissioned by the Discover Business Card, which strives to offer the best business credit card for American small businesses, and is conducted by Rasmussen Reports, LLC (www.rasmussenreports.com), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of six consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August of 2006. In addition to generating the index, the Small Business Watch surveys small business viewpoints on key business drivers, and also surveys 4,000 consumers to gauge purchasing behavior and attitudes towards small businesses. For past results and small business survey data, visit www.discoverbiz.com/watch. For information on Discover Business Card, visit www.discoverbiz.com/watch.

About Discover Financial Services LLC

Discover Financial Services LLC, a business unit of Morgan Stanley (NYSE: MS), operates the Discover Card and the Discover Network. Discover Financial Services also operates the PULSE ATM/debit network. For more information, visit www.discovercard.com, www.discovernetwork.com or www.pulse-eft.com.

The views and opinions expressed by small business owners and consumers who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

Media Contacts

Jon Drummond
Discover Financial Services
224-405-1888
jondrummond@discoverfinancial.com

Daniel Delson
Robinson Lerer & Montgomery
646-805-2036
dmd@rlmnet.com