Small Business Confidence Rises as Cash Flow Issues Decline
Economic confidence among small business owners rose slightly in June as cash flow concerns abated and the mood on the economy held steady, according to the latest Discover Small Business Watch. The monthly index rose to 80.9, up from 78.1 in May.
“Cash flow problems are back to levels that are more in line with what we’ve typically seen since the Watch began nearly three years ago,” said Ryan Scully, director of Discover's business credit card. “Cash flow concerns usually erode confidence because they represent something tangible to a business owner, more so than an expectation or perception about the economy.”
June Highlights:
- 42 percent of small business owners say they have experienced temporary cash flow issues in the past 90 days, down from May’s record high of 49 percent.
- 26 percent believe economic conditions are improving, up from 23 percent in May, while 57 percent believe conditions are getting worse, which is unchanged from the previous month; 14 percent said the economy is staying the same, and 4 percent weren’t sure.
- 59 percent of small business operators rate the economy as poor, down 1 percent from May, while 8 percent rate the economy as excellent or good, and 30 percent called it fair.
- 49 percent of owners see economic conditions for their businesses getting worse, up 1 percentage point from May; 25 percent see conditions improving, also up 1 percentage point; 22 percent say conditions are the same; and 4 percent weren’t sure.
- 51 percent of small business owners say they plan to decrease spending on business development over the next six months, down from 53 percent in May; 22 percent plan to increase spending, and 24 percent are not planning any spending changes.
Generating New Business Gets More Challenging
“The economy clearly seems to be taking its toll on the independent spirit of small business owners,” Scully said. “This year 36 percent told us they are willing to walk away from their own business to earn more money working for someone else – a jump from 30 percent last year. They are spending much more time this year trying to find new business and deal with government regulations.”
While independence and flexibility continue to be the main reasons why people start their own businesses, a sense of accomplishment and needing a job also gained ground as key motivators compared to the last year:
Health Care Poll: Owners Split on Universal Healthcare
“While many small business owners feel constrained by the costs of offering health insurance to their employees, they’re still split on whether they want the government to get involved,” Scully said. “This is a further indication of their independent streak and their aversion to government intervention in running their businesses.”
Seventy-eight percent of small business owners said they do not offer health insurance to employees, and they are split on whether America needs a universal healthcare system: 48 percent of them said the country does not need a government-run option, 45 percent said it does and 7 percent weren’t sure.
Of those who offer health insurance, 62 percent said a government mandate to either provide insurance or pay a fee would have a negative impact on their businesses; 16 percent said the effect would be positive; 11 percent said it would have no impact; and 3 percent weren’t sure.
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.
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