Confidence Index Remains Flat as Small Business Owners Dig In
RECESSION: Half of Small Business Owners Say Economic Recovery
More Than a Year Away; 53% Say Small Businesses Will Lead U.S. Recovery;
61%
of Owners Likely to Tap Personal Assets to Stay Afloat
RIVERWOODS, Ill.--(BUSINESS WIRE)--Oct. 26, 2009--
The economic confidence of American small business owners remains
largely unchanged in October, rising less than 1 point from the previous
month on the Discover®
Small Business WatchSM index. The Watch rose from 87.7 in
September to 88.5 in October, with only one key measurement – business
investment – showing any significant change.
“Small business owners aren’t showing any new optimism in the economy,”
said Ryan Scully, director of Discover's business
credit card. “Half of them think it will take more than 12 months
before most people feel the economy has stabilized, and two out of three
are expecting to dig into their own pockets to stay afloat.”
One of the only key measurements to show any significant change from
September is the likelihood of investing in business development in the
next six months in areas such as advertising and capital expenditures.
On the positive side, the number of those who said they plan to decrease
spending dropped from 50 percent in September to 44 percent in October.
However, the number of those planning no changes jumped from 22 percent
to 32 percent. Those who are planning to increase spending dropped from
25 percent to 23 percent.
“This could indicate that any significant expansion and investment in
the small business sector isn’t likely to arrive for quite a while,”
Scully said. “They’re holding on to their money.”
October Highlights:
-
55 percent of small business owners rate the economy as poor, up from
53 percent in September and 48 percent in August; 36 percent rate it
as fair and only 8 percent say it is excellent or good.
-
44 percent of small business owners think the economy is getting
worse, down from 46 percent in September; 35 percent of owners say the
economy is getting better, up from 33 percent in September.
-
44 percent of owners say they have experienced cash flow issues in the
past 90 days, down from 46 percent in September.
-
29 percent of small business owners see economic conditions for their
businesses improving, unchanged from September, while 43 percent see
their own conditions getting worse, down two percentage points over
last month.
Majority of Owners Say Small Businesses Will Lead U.S. Recovery
When asked whether small businesses will lead the U.S. economy to
recovery or trail it, 53 percent say the sector will be out front, 29
percent say following the recovery is more likely, and 18 percent aren’t
sure.
As for when that might happen, half of all owners say that it will be
more than 12 months before most people feel that the economy has
stabilized, 28 percent say it will take six to 12 months, 13 percent say
it could take less than six months, and 9 percent weren’t sure.
Sixty-nine percent of owners say that the current economic climate has
hurt their business. Of this group, 43 percent say it will be more than
12 months before their businesses rebound, 24 percent say it will take
six to 12 months, 13 percent think that they’ll be on safe ground in
less than six months, and 20 percent couldn’t venture a guess.
6 in 10 Small Business Owners Are Likely to Tap Personal Assets to
Stay Afloat
Forty percent of small business owners say it is “very likely” that they
will need to borrow from their personal assets over the next 12 months
in order to stay in business, while 21 percent say that it is “somewhat
likely,” 34 percent say it is “not very likely” or “not at all likely”
they will take similar measures, and 4 percent weren’t sure.
At the same time, most small business owners say they do not plan to ask
friends and family for financial support: 67 percent of owners say that
it is “not very likely” or “not at all likely” they will ask loved ones
for money, and 31 percent say it is “very likely” or “somewhat likely”
they will borrow from friends and relatives.
SBA Loans Remain Unpopular
Small business owners are also clearly not interested in Small Business
Administration loans. Ninety percent of owners say that they have never
applied for an SBA loan. When presented with a list of several reasons
why not, 48 percent say that they did not need an SBA loan, 15 percent
say they are unfamiliar with the programs, 14 percent say they received
funding from another source, 9 percent say it takes too much time, 9
percent say they would rather use their personal assets, and 6 percent
say they have some other reason or are not sure.
Competition Takes Its Toll
When asked about the competitive landscape, a majority, 56 percent, of
small business owners say competition stayed about the same in the past
six months, while 25 percent say it increased, and 18 percent say it
decreased.
Of those that have experienced increased competition in the past six
months, 61 percent say that their sales have been hurt by it, 14 percent
say it has helped sales, 18 percent said it had no impact and 4 percent
weren’t sure.
Among those who have experienced less competition in the past six
months, 47 percent say that they have seen no impact to their sales, 26
percent say that it has helped sales, 24 percent say it has hurt their
sales, and 4 percent weren’t sure.
Biggest Issue Facing Small Businesses
When asked to select the biggest issue facing their businesses right now
from a list of possibilities, small business owners chose the following:
-
Sales generation, 28 percent
-
Taxes, 22 percent
-
Operating costs, 15 percent
-
Health insurance, 10 percent
-
Access to capital, 5 percent
-
Inflation, 4 percent
-
Some other issue, 6 percent
-
Not sure, 10 percent
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.
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 have 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 750 small business owners. It is commissioned by
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 2006. In addition to generating the index, the Small
Business Watch surveys small business owners every month on key issues,
and polls 3,000 consumers four times per year to gauge purchasing
behavior and attitudes towards small businesses. For past results and
survey data, visit www.discovercard.com/business/watch.
For information on Discover Business card, visit www.discovercard.com/business.
About Discover
Discover Financial Services (NYSE: DFS) is a leading credit card issuer
and electronic payment services company with one of the most recognized
brands in U.S. financial services. Since its inception in 1986, the
company has become one of the largest card issuers in the United States.
The company operates the Discover card, America's cash rewards pioneer,
and offers student and personal loans, as well as savings products such
as certificates of deposit and money market accounts. Its payments
businesses consist of Discover Network, with millions of merchant and
cash access locations; PULSE, one of the nation's leading ATM/debit
networks; and Diners Club International, a global payments network with
acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com.
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Source: Discover Financial Services
Jon Drummond
Discover Financial Services
224-405-1888
jondrummond@discover.com
or
Amanda
Bonzo
Robinson Lerer & Montgomery
646-805-2060
abonzo@rlmnet.com