Economic confidence stalls after 3-month slide, job creation on hold.
A three-month slide in small business confidence ended in September, driven in part by fewer small business owners reporting cash flow issues than they did in August, according to the Discover® Small Business WatchSM. The monthly index rose from 73 in August to 73.8 in September after falling 14.4 points since May.
While the recession is technically over, large numbers of small businesses owners say they won’t see true recovery for at least six more months,” said Ryan Scully, director of Discover's business card. “Three quarters of them were hurt by the downturn, which affects their ability to add jobs, build inventory or re-invest in their businesses.”
Forty-six percent of small business owners report having cash flow issues this month, down from 53 percent in August; 50 percent said they do not have cash flow issues and 5 percent aren’t sure.
Despite this, a record 68 percent of small business owners rate the economy poor, up from 62 percent in August; 26 percent rate it fair, 4 percent rate it good and only 2 percent rate it excellent.
In September, intentions for spending on business development in the next six months produced two record numbers. A record low 16 percent of small business owners plan to increase spending, down a percentage point from last month’s then record low of 17 percent. Fifty-seven percent of small business owners report plans to decrease spending, the highest in the history of the Watch, while 24 percent report no changes to their spending plans and 3 percent aren’t sure.
Other September Confidence Indicators
- 55 percent of small business owners report economic conditions are getting worse for their businesses, equaling the record high percentage from last month; 23 percent expect them to stay the same and 20 percent see them getting better.
- 57 percent of small business owners say the economy is getting worse, down 5 percentage points from August; 26 percent say it’s getting better, 15 percent report it’s the same and 2 percent aren’t sure.
Small Business Job Creation on Hold
Nearly three out of four respondents, 71 percent, said small business owners are waiting for the economy to improve before they do any hiring, with only 9 percent who think otherwise and the remaining 20 percent just not sure.
When asked if the economic climate has hurt or helped their business, 73 percent said it had hurt them, 4 percent said it helped them and 21 percent said it had no impact. Of those whose businesses were hurt, 41 percent think it will take more than a year to recover, while 24 expect it to take six to 12 months, 11 percent said three to six months and 1 percent expects to recover in less than three month. Only 2 percent of small business owners said their businesses had already recovered.
When the economy improves, 46 percent of small business owners said their segment was more likely to begin hiring, while 35 percent thought larger businesses were more likely to lead the hiring charge; 19 percent weren’t sure.
On the issues of proposed tax breaks and federal stimulus, small business owners were evenly split on whether they would lead to more job creation: 41 percent think tax breaks and stimulus would lead to more jobs, and 42 percent disagree, with 17 percent not sure.
When asked to choose the biggest obstacle small businesses face when hiring from the following list, respondents answered accordingly:
- 28 percent, Uncertain economic outlook
- 22 percent, Not enough revenue
- 17 percent, High taxes
- 7 percent, Can’t secure loans
- 9 percent, None of the above
- 2 percent, Not sure.
- The remaining 16 percent say they never intend to hire more workers.
A 100 percent tax break for capital investments will only help about 1 in 4 small businesses: 26 percent said it will help, 51 percent said it won’t help them, and 23 percent aren’t sure.
Loans Not Key to Small Business Growth
When asked if they needed a loan to grow their businesses, 71 percent said they did not; 20 percent said they did, and 9 percent aren’t sure. Of those who do need a loan, 44 percent need less than $25,000, 37 percent need $25,000 to $100,000, 11 percent need $100,000 to $250,000, 4 percent need $250,000 to $1 million, and 3 percent need more than $1 million.
Free Money Most Likely Would Pay Off Debt or Go Back Into Business
When small business owners were asked what they would do with a no-strings-attached financial windfall from the following list of options:
- 31 percent would pay off debt
- 29 percent would make an investment in their business
- 19 percent would save or invest it
- 7 percent would put it to personal use
- 3 percent weren’t sure
- 8 percent said none of the above
- No one planned to invest it in technology